Simple Advice About Choosing the Best Small Business Insurance

Small business insurance

As the owner of a small business, you’re likely passionate about your job. Maybe you’ve done a lot of work to build it up from scratch, or perhaps taken it over from its former owner. Either way, there’s nothing you want more than to ensure your business continues to grow and remain profitable. Often, it may seem that by keeping your customers happy, all you have to do is reach for the stars. Unfortunately, that’s not always the case. The larger your business gets, the higher your chances of involvement in a court case and claims of liability become. In fact, 90 percent of businesses get involved in lawsuits.

Depending on the needs of your business, there is insurance coverage available to protect you from legal problems and many other risks of being a small business owner. This handy guide will help you think about what you need, and then know which insurance companies sell those products.

What Nearly Everyone Needs

The types of coverage you need can vary widely, depending on the size of your business and its industry. For some, the needs are quite simple because the chances of lawsuits and liability are comparatively low. Others, however, have significant risks involved and will want more comprehensive coverage. Below are the essentials for nearly everyone.

Business Owners Policy (BOP)

If you’re running a small business, like a shop or a handful of apartments, this is a nice catch all for basic liability. If your workplace gets broken into or suffers fire damage, these policies generally cover the losses. Insurance companies typically say that a business owner policy covers three basic things. These are general liability, property damage (mostly refers to your place of business), and business interruption.

Let’s break those types of coverage down. General liability insurance helps you if your business faces a lawsuit. Slip and falls, accessibility suits, property damage, and nuisance lawsuits generally fit into this category. One thing you should notice here is that property damage is referred to twice. That’s because with a business owner’s policy, you have coverage whether the damage is to your place of business (rented or owned), your customer’s property, or both. Business interruption insurance covers you from the risks of experiencing a business interruption. For example, if your equipment breaks down and you can’t get anything done for a while, the loss of income would be reimbursed with this coverage.  

Other add-ons available for a BOP include coverage for losses due to criminal activity, loss of merchandise, or your employee’s mishandling of funds. We’ll discuss these types of coverage more thoroughly later.

Business Owners Policy Costs: The price of coverage varies widely over different industries. Restaurants pay the most, while home-based business owners tend to pay the least. Deductibles and policy coverage limits influence prices as well. Overall, the median price is $53.00 monthly.

Find Out If Business Insurance Is A Must or A Maybe

Best BOP Coverage

Some insurance companies are better at certain types of insurance than others. In particular, various companies specialize in small business insurance, while others are more tailored to medium and large businesses.

Hiscox: This company is based out of Chesapeake, VA, and specializes in small business. Unlike some others, they’re comfortable working with home-based businesses. They have excellent customer service and are known for writing some of the cheapest business insurance policies with quality coverage.

State Farm: If you like dealing with other small business owners, you’ll love State Farm. That’s because this insurance company uses independent agencies to sell their policies. They have a personal understanding of the risk involved in self-employment. State Farm isn’t always the cheapest choice, but they are known for being fair when there’s a claim.

The Hartford: This is another company that specializes in small business insurance coverage. One of the things that’s great about their policy line is that it’s versatile. They’ll add on just about anything that you need, and have agents who are specialists in most industries.

Small business insurance

Worker’s Compensation Insurance

Worker’s compensation insurance is arguably the most critical policy your business can carry if there are any employees. After all, workplace accidents and injuries are a frequent cause of disability and lawsuits. Skip this type of coverage, and you’re inviting disaster if something happens to an employee on the job. Just one lawsuit over this type of liability could easily bankrupt your business.

In most states, any business with employees is required to carry worker’s compensation insurance. If you are a sole proprietorship, like a freelance writer or someone with a home office, you probably won’t be required to carry it. However, if you have as few as one employee, your state may require coverage. That’s especially true if you’re in a high-risk industry like construction. Options in this category vary, but most states allow insurance companies to offer a worker’s compensation policy for their business clients. Occasionally, independent contractors can be required to have workers compensation for himself or herself. 

Workman’s compensation policy costs: These vary widely, depending on the regulatory environment in a given state and the risk level of your industry. For most policies, the price is a percentage of your payroll. Progressive Insurance reports a median cost through their small business program at around $157 per month.

Best Worker’s Compensation Insurance Companies

Depending on the laws in your state, you may be able to purchase coverage from a private insurer. Often, insurance agents recommend that you purchase it from your liability carrier to save money. Just be sure to discuss these options with a good business advisor to be sure it’s your best bet.

Progressive Insurance: A large, national company known for its automotive and residential property insurance, Progressive has a dedicated small business insurance program. They’re known for being financially stable, and do business in most states.

Farmer’s Insurance: This is a household -name insurer that also does commercial insurance. Although they don’t write policies for medical professionals, they’re great if you are in the service or construction industries. With over 90 years of being in business, they know how to customize your policy. A nice bonus: Farmers Insurance offers its clients safety training that can help them reduce the risk of having a claim due to work-related injuries.

Next Insurance: This new kid on the block is an excellent choice if you need low worker’s compensation insurance rates. In fact, their website advertises that they charge as little as $14 per month for low-risk industries. For the budget-conscious small business owner, they also offer inexpensive liability coverage. Their business plan is simple: leverage advanced technology to reduce costs and then pass those savings on to their customers. An added plus: their reviews are generally pretty good.

Short Term Disability

While many business owners would consider this to be extra, in a handful of states, it’s mandatory if you have employees. For businesses in other states, it’s a nice thing to have. This is true even if you’re just a home-based business. Why? Because if you can’t work for a while, the loss of income could be a considerable burden. States that require short-term disability do collect a payroll tax for this. Everyone else should consider a private policy. Keep in mind that any benefit of this type can aid your employee hiring and retention efforts. Who’s going to work for a cheapskate when they can go somewhere with benefits?

Here’s how short term disability works. If an employee becomes sick or injured for a non-work related reason, your worker’s compensation won’t pay the bill. In most cases, any health insurance that the employee has will pay for the medical expenses, but lost wages are another story. Absences from work that exceed the exemption (this can be up to two weeks) result in a payout of a percentage of the employees’ wages.

How much does short term disability insurance cost? That depends on the situation. If it’s mandatory coverage, you will pay these costs to the state through your business taxes. For policies through private insurance companies, expect to pay around 1 to 3 percent of your annual salary. Keep in mind that your employees can elect this coverage themselves if you have a group policy.

Best Disability Insurance Companies

Assurity: Long-known for employee benefits, they offer both individual and group disability plans. This availability means that even home-based businesses can get coverage. They also pride themselves on corporate ethics; they’re both a mutual company and a B-corporation. This means that they work for their employees and policyholders. As an SMB owner, you can readily appreciate this.

Mutual of Omaha: Another well-respected insurance company, Mutual of Omaha, provides a comprehensive range of disability insurance products. Especially noteworthy is the option to get coverage for your business overhead. Their financial standing is very strong, and they are well respected overall.

Aflac: The talking duck could be looking out for you after all! Only available as a voluntary employee benefit, Aflac disability insurance pays cash when you’re unable to work. It’s easy to sign up, and Aflac is well-known for paying promptly. Premiums are also very reasonable, so this is a great option if you’re trying to keep your overhead lower.

Unemployment Insurance

Unlike most other types of insurance, you have to buy unemployment insurance from the government. Both your state and the federal government have programs that all businesses with employees must participate in. Generally speaking, you’ll pay for this coverage through payroll taxes, filed as part of your business tax return.

Here’s how unemployment insurance works for business owners. If you terminate the employment of a worker for any reason, they might file a claim through the state. Depending on why they left your company, the state may award them benefits. While states have their own rates for this type of insurance, the cost depends on your payroll amount and how often there is a claim.

Unemployment insurance policy costs are set by the state and change every year.

Business Insurance for Growing Businesses

While businesses in their earliest stages don’t need much insurance coverage, this isn’t the case as they get bigger. Instead, the needs of business owners tend to get more complicated as there are more assets and higher risks involved. These types of coverage are also fairly basic, but might not be necessary for every business owner. That’s because they are more tailored to industry-specific risks your business may face.

General and Property Liability Insurance

For businesses that don’t qualify for a multi-coverage business owner policy, it is usually necessary to purchase general and property liability insurance. Generally speaking, ineligible businesses have more employees, larger sales volumes, or are in a high-risk industry.

If you need the larger coverage limits, you’ll want to make sure you buy both general liability and property liability policies. This way, you have coverage if there is a lawsuit or damage to your business property. The amount of liability coverage you need varies depending on your exposure to a wide variety of situations. Your business assets are another factor to consider. Experts recommend that you speak to an insurance agent to determine what’s best for your business.

General and property liability coverage costs: As always, costs vary on several factors, including industry risks and desired deductibles. However, as a general rule, $1 million in coverage will cost anywhere from $300 to $1,000 annually. Insurance agents and business lawyers are experts at determining how much liability insurance you need.

Best General Liability Insurance Companies

When choosing the best liability insurance for your business, you’ll want to choose a company that is financially secure and has good claims service. After all, if you get sued, they’re the ones who will pay the bills.

Nationwide Insurance: Best known for the advertisements saying they’re “on your side,” Nationwide is a mutual insurance company. This means that policyholders own the company. As a result, this type of company tends to have lower costs of coverage and excellent customer service. If there’s a lawsuit, this client focus is just what a small business owner needs.

Geico: Now you can connect that quirky gecko to your business because GEICO offers business insurance.  Known as an inexpensive insurance company, it is very financially stable. You even get access to customer service 24/7, and claims settle quickly.

Travelers: Travelers is one of the oldest and largest insurance companies in the U.S. While Travelers isn’t one of the cheaper options, it is great if you need excellent claims handling. Business insurance options are comprehensive.

Professional Liability Insurance

Depending on the type of business you run, some type of professional liability insurance may be valuable. Best -known for being required of doctors and lawyers, people also call this type of coverage “malpractice insurance,” or “errors and omissions” insurance. Generally, if your profession depends heavily on professional judgment, this is good coverage to have.

Determining if you need this type of insurance is easier if you understand the difference between it and general liability. The latter covers you if a customer slips and falls at your office. However, it won’t cover you if something awful happens because you made a mistake, or if someone accuses you of wrongdoing. If you’re a real estate agent and you overlook something critical during a house sale, the customer could sue. Protecting your business requires professional liability coverage. You’ll want to talk to your insurance agent about how much coverage you need.

Professional liability insurance costs: Like most types of insurance, this varies widely. Broker Insureon gives a median premium of $920 per year.

Best Professional Liability Insurance Companies

Choosing the right insurance company can be intimidating. After all, there are so many out there. For this type of coverage, policy limits and deductibles can be quite high. You’ll want to choose a company with significant financial resources. Also, keep in mind that not every company will insure high-risk industries.

Chubb Insurance: One of the largest insurers in America, Chubb specializes in business policies. Although they tend to be expensive, if you’re in a high-risk industry, they’re a great choice. That’s because of their high tolerance for risk, excellent policy renewal rate, and customer service. In fact, they specialize in high-limit policies for businesses of all sizes.

CNA Insurance: A company that works mainly for businesses of all sizes, CNA boasts that they’ll insure any industry for professional liability. That means that doctors, lawyers, and construction companies can all count on them. Like most commercial insurers, CNA is financially strong, so you know they’ll be there when you need it.

AIG Insurance: another large insurer with a long history, AIG will take on high-risk industries as well as less common specialty risks. Since they have a full range of insurance products, you can also count on them later for employee benefits. Their site specifically says they take nonprofits, which is an added bonus.

Small business insurance

Employment Practices Liability

Let’s face it: hiring employees is a challenge, but did you know that firing them can be even harder? Lots of employees see getting fired as a potential gold mine. Terminate an incompetent employee? They might accuse you of racist intent. Has your pregnant employee embezzled money? She might claim that you fired her for being pregnant. It doesn’t matter. Unless you have everything well documented, there’s a good chance a disgruntled employee might bring an expensive lawsuit.

That’s why, if you have more than a couple of employees, you should consider adding employment practices liability (EPLI) to your business policy. Some of the federal protections don’t apply to businesses with only a handful of employees, but you really should think twice about taking risks. You should also consider that there are other types of employment lawsuits other than discrimination. For example, a former employee might claim breach of contract. These claims are expensive, and coverage is essential for most businesses. Don’t forget, however, that prevention will also reduce your risk.

EPLI coverage costs: Admittedly, this one isn’t cheap if purchased outside a business owner’s policy (described above). For independent policies, the price varies widely. As an example of how the number of employees affects the premium, a policy for companies with ten or fewer employees costs between $800 and $2,000 for a million-dollar policy. Costs jump between $4,000 and $6,500 if you have 50-100 employees. These estimates assume a deductible of $2,500.

Best EPLI Insurance Companies

Amtrust Financial: This company is new to the insurance market as a whole, and began with small businesses in mind. Though they are new, they have expanded rapidly and have an international presence. You might like them because they write specialized policies that other companies can ignore and have good customer service. At the same time, Amtrust is a financially stable private company.

Philadelphia Insurance: Based in Pennsylvania, Philadelphia Insurance specializes in hard-to-insure businesses. Like Amtrust, they only write business policies. Unlike some other companies, Philadelphia Insurance will write stand-alone EPLI policies. This can be helpful if you choose an insurance carrier for general liability that excludes this coverage. Best of all, they’re very financially secure and have plenty of happy customers.

Hiscox: Best known for its business owner policy, Hiscox also offers EPLI separately for business owners who don’t qualify for a BOP. You’ll appreciate the emphasis Hiscox has on small businesses, but they also give your company room to grow. That’s because they also offer employee benefits when you’re ready.

Business Interruption Insurance

Having a fire or flood destroy your business is bad enough. If you’re a smart small business owner, you’ll already have the property damage liability discussed above. The trouble is, this type of plan doesn’t replace the losses from the business interruption. Unless you get extra protection, you might have trouble meeting business expenses and liabilities. However, if your business is covered by this type of policy, then you’ll be able to meet all your obligations up to the coverage limit. You are less likely to face business closure or bankruptcy for a situation beyond your control.

Keep this in mind: although your property insurance covers equipment and other tangible assets, interruption coverage payouts depend on property damage claims. In other words, interruption insurance only kicks in when something happens at the property. If you need other situations to be covered, think about getting disability insurance or other plans to meet your needs. Either way, it’s nice to know that with the right insurance you’ll always be able to pay your employees and other bills that come in. Furthermore, it’s a great way to keep employee loyalty.

Business interruption insurance costs: Unless you’re purchasing it as part of a business owner policy, this type of insurance can be expensive. Nationally, the average cost is around $1,200 per year, though in low-risk locations, it’s closer to $750.

Best Business Interruption Insurance Companies

The Hartford: Mentioned before as a small business insurance specialist, The Hartford calls their business interruption policy “business income insurance.” You’ll appreciate their emphasis on consumer education and the fact that you can get coverage for a wide variety of perils. They’ll even cover issues related to essential employees and other less-common options. Best of all, they’re legendary for having high customer satisfaction.

Chubb: Coverage through Chubb is legendary for its high customer satisfaction and ease of use. Since they’re one of the largest international insurance companies, you’ll never have to worry about their going out of business. Even better, they cover high-risk businesses that some other insurance companies won’t touch. Their rates for this type of coverage are reasonable.

Allstate: Also mentioned for their BOP’s, Allstate is known for its great customer service. Remember: if your business qualifies for a BOP, Allstate offers quality plans. If not, they’re still one of the best-known property and casualty insurers in the nation. One thing you’ll appreciate is their wide range of insurance products, so there’s good potential for bundle discounts.

Commercial Auto Insurance

Ever applied for personal auto insurance and been asked if you drive for work? That’s because, under certain circumstances, you could need commercial auto insurance. As a rule, the reason you should get commercial auto is that it shields your business from liability related to an automobile accident. A personal injury lawsuit from such an accident could result in a huge judgment against you or your business.

So, when do you need commercial auto? Briefly, it isn’t required if you only use a vehicle to commute. This is considered personal use of your car, and won’t expose your business to liability. However, if you or an employee is driving your car for business purposes, you’ll need commercial auto. Other less-obvious situations where you might need commercial auto are the use of a personal car for deliveries, as an Uber vehicle, or hauling business equipment. Generally, you’ll want to consult a licensed insurance agent to make this decision.

Keep in mind that policies can be purchased to cover yourself and your employees who do business in the car, but not one that your business owns. This is called “non-owned commercial insurance.” If your business owns the car, then it’s just a commercial policy.

Costs of commercial auto insurance: As with personal auto, this varies. Insurance companies consider driving records, the value of the vehicle, and the coverage you choose. On average, premiums range between $1,200 and $2,400 for a passenger car, or between $800 and $2,000 for light trucks.

Best Commercial Auto Insurers

Progressive: Best known for its offbeat commercials, Progressive is one of the largest commercial insurers in America. One thing that makes them unique is that they don’t have brick and mortar locations. However, it’s easy to buy a policy from them online or through a third-party insurance agent. J.D. Power says that Progressive is known for customer satisfaction, and they are financially stable. Rates tend to be competitive due to their low overhead.

Travelers: One thing you might like about Travelers is that they don’t do a lot of TV advertising. The reason for this is that they’re such a large company, and business owners who want quality coverage at a fair price know they can get it here. When considering commercial auto insurance, you’ll want to know that Travelers was one of the original transportation industry insurers. They remain innovative in this sector. Travelers aren’t afraid to take risks.

Geico: If you need solid, basic commercial auto insurance, Geico is an excellent choice. After all, they have excellent access to customer service and claims management. For businesses that have a lot of vehicles that operate at night, being able to file a liability claim at any time is an important feature. Just be aware that they don’t have as many different types of other business insurance as some other companies.

Choosing the Best Insurance for Your Business

No matter the size of your business, there are wide varieties of risks to consider. Fortunately, you don’t need to shop for insurance on your own. There are some resources available to help you decide what to buy and how much you need. In an environment where businesses must remain competitive while also making their overhead, it is important to make the right choices. You can’t afford not to.

Independent Insurance Agents

Consulting an insurance agent licensed in your state is a great way to sort out what you need. They’ll look at your business income, the types of liability it faces, and your tolerance for risk. What’s even better is that an independent agent can often give you quotes for several companies and insurance lines at the same time. This can save you a lot of money and helps to ensure you get the right policy. Insurance agents will even help if you need to make a claim or your needs change.

Insurance Brokers

An insurance broker is a company that helps you choose the coverage you need at the price you can afford. Unlike agents, brokers have more flexibility on what they can offer. In fact, if you go to an insurance broker, you’re likely to get a less biased opinion. Like agents, a broker is also paid by the insurance company. Larger brokers might even have after-hours customer service.

Commercial Insurance Lawyers

If your business has a high risk of lawsuits or more complex liability control needs, you may want to get advice from a commercial insurance lawyer. Unlike agents and brokers, the lawyer has a broader understanding of the local legal climate and industry-specific problems. Better yet, they can give you peace of mind if there’s a lawsuit.

What type of business are you in? How did you get the right insurance for your company? Let us know in the comments below.