Why You Should Buy Insurance Before Launching Your Small Business
September 12, 2011
Heeding the advice of successful business owners who've been in your shoes is one of the smartest things you can do as an entrepreneur. In a survey we conducted of small U.S. businesses, 72% said a startup should have small business insurance from the moment it launches.
Over 500 small business executives responded to the survey, lending their years of experience to help those still in the startup phase learn from their successes and missteps. Here’s their list of the biggest mistakes small businesses make when buying insurance:
- 37% said the biggest mistake was not understanding what their policy covers.
- 17% said another major slip-up was not shopping around to find the best price for their insurance.
- 16% said not buying a business insurance policy that is tailored to their line of business was their main regret.
A common myth is that if you’re small, you don’t have risks (or that your risks are so small that you don’t need to worry about them). This is false. Your business could incur legal liabilities many times more than your best projections provide. This year, small businesses are forecast to pay $152 billion in tort liability costs, according to the U.S. Chamber Institute for Legal Reform. Defending yourself against claims is stressful, time-consuming, and expensive, and most small business owners can’t do it on their own.
Small businesses can protect themselves and still keep their overhead down with affordable, customized insurance policies. The time and effort you take to find a policy that properly fits your needs will be well worth it if you ever need to make a claim.
Every firm should look for a policy that suits their unique needs, but there are two types of coverage no business should be without: General liability and professional liability insurance (also known as errors and omissions insurance).
If you have employees, you should also consider getting workers’ compensation insurance. It’s a legal requirement in every state except Texas, but businesses there can still be liable for any job-related illness or injury, so many companies in Texas choose to buy the coverage to be on the safe side.
When shopping for small business liability insurance, it’s important to take into account the financial health of the insurer as well as its particular strengths, such as their ability to understand your line of business and the biggest threats you face. Many aspects of starting and growing your own business are uncertain, but protecting it and your assets can give you the peace of mind to focus your attention on what you do best – making your business a success.