How to Get Business Insurance in 3 Easy Steps

  • Brandon Boushy by Brandon Boushy
  • 7 months ago
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Are you considering starting a business and wondering whether you need business insurance? Maybe you’ve already started it and are not sure how to get insurance for your business. Maybe something occurred that led you to wonder if there is a way to protect against an event in the future. All of these are reasons you might research how to get business insurance.

Business insurance is focused on protecting your business from major liabilities that can occur while running a business. There are many different types of insurance that small business owners can get to protect their businesses, but we’ll make it easier to identify the insurance you need.

We’ll discuss:

  • Whether or not you need small business insurance
  • The types of insurance
  • How much business insurance costs
  • Which insurance company is best for small businesses
  • How to apply for business insurance

Get ready to learn everything you need to know about getting small business insurance for your company.

Do I Need Business Insurance?

Most businesses will need some type of insurance because certain activities require insurance. The most common types of insurance a business will need are:

  • Workers’ compensation insurance (employees)
  • Unemployment insurance (employees)
  • General liability insurance for the small business (covers property damage and customer injuries)
  • Commercial vehicular insurance for commercial vehicles (required if using a vehicle for business purposes)

These will be required if you have employees, operate your business anywhere besides your home, or drive a motor vehicle. The Hartford offers a state guide to small business insurance that is useful to establish what is required in your state.

Even if you don’t need a specific type of business insurance, it can help protect your assets and give you peace of mind. Don’t take legal requirements as the modus operandi. They are the minimum you should have. Do what is best for your situation.

There are some special considerations that will need to be considered when choosing business insurance.

The primary considerations include:

  • What business activities does the insurance cover?
  • Who does the business insurance protect?
  • What are the policy limits per incident and per occurrence?
  • Are there specific technical, industry, or other requirements to qualify for the insurance?
  • What are the deductibles for the insurance?
  • How much does each policy cost?

The answers to most of these questions will be provided in the following section on the different types of small business insurance. Let’s look at them now.

Type of Business Insurance

A man typing on a white iPad

When wondering how to get business insurance, there are a variety of small business insurance policies to consider. Besides workers’ compensation insurance, unemployment insurance, general liability insurance, and commercial auto insurance there are also:

Commercial Property Insurance

Commercial property insurance, sometimes called business property insurance, is used to protect property owned by the business, including inventory and equipment. Policies may exclude loss from theft, natural disaster, and customer fraud. Nationwide explains how to estimate how much coverage you need, but you can get a $60K policy with a $1,000 deductible for under $1,000 per year.

Professional Liability Insurance

Professional liability insurance, sometimes called errors and omissions insurance, protects professional services like engineers, architects, and accountants. It covers negligence and other service-related errors. If your business has the potential to cause substantial harm to customers, you may want to purchase a policy. Insureon estimates construction policies are the most expensive at $1,705 per year.

Product Liability Insurance

Product liability insurance covers claims involving defects in physical products including manufacturing, design, and marketing. Fundera estimates that you will pay $.25 per year for every $100 in sales, meaning $1 million in revenue would cost $2,500 to insure.

Business interruption insurance

Business interruption insurance is an add-on to property insurance that protects lost revenue when a business is forced to shut down. It typically covers 30 days but may cover up to 360 days and starts at $18 a month. You can learn more about business interruption insurance on Investopedia.

Cybersecurity Insurance

Cybersecurity insurance, which might be called cyber liability insurance, protects against losses from data breaches. AdvisorSmith did a study on cybersecurity insurance and found that most businesses can spend $739 for a $250,000 policy with a $2,500 deductible.

Directors’ and Officers’ Insurance

Directors’ and officers’ insurance, often called D&O policies, protect the directors and officers against personal liability. These policies normally cost between $5K and $10K to cover $1 million of losses, most commonly during bankruptcy lawsuits. These policies typically include three categories:

  • Side A is for when the company is unable or unwilling to pay the costs.
  • Side B is for when the company is willing to cover the directors’ or officers’ liability.
  • Side C covers the company itself and may be secured by assets.

Learn more about D&O on Investopedia.

Key Person Insurance

Key person insurance is a life insurance policy to cover the loss or death of a key member of a small business. This is used frequently in major corporations to protect against 5-10 years of revenue loss when an important team member leaves. As a small business, this insurance can be used to protect your family business revenue if you die. Learn more on Policy Advisor.

A Business Owner’s Policy

A man typing on his computer

A business owner’s policy (BOP) combines general liability insurance, commercial property insurance, and business interruption insurance at a discount to encourage a small business owner to carry all their coverage with one insurance company. Most will have available add-ons if it doesn’t cover all you need or want. Make sure to get one that adjusts to your business needs.

How Much Does Business Insurance Cost?

As you’ve seen from the types of insurance above, small business insurance can cost anywhere from $2,000 per year to millions per year if you become a major corporation that utilizes all the offerings provided by an insurance company.

Make sure you know what you need before contacting an insurance company and remember to ask about exclusions. When I was living in Florida, I met people and business owners who lost millions because their insurance company did not cover damage from hurricanes. 

The insurance companies do not offer a policy that is both wind and water. You’ll have to have a separate insurance company for each. Be prepared to have them fight over whether water or wind caused the damage, and who should cover it.

Keep reading to learn about the best insurance company for small businesses.

What Insurance Company Is Best for Small Business Owners?

The answer is going to be different for everyone, but there are some common providers that tend to be more business-friendly. Two of the insurances that I have personally interacted with and would recommend to anyone are:

  1. The Hartford
  2. Hiscox

Let’s look at each of these to understand why I recommend them.

The Hartford

Years ago, I had an accident where another driver hit me from behind while I was delivering food. The Hartford was the insurance company for the other driver. They really impressed me with their professionalism. Most insurance companies will fight every single claim and drag it out.

Not The Hartford!

I was able to negotiate a deal with The Hartford that included:

  1. Getting my car fixed
  2. My lost wages due to the company policy at work
  3. $1,000 because their insured motorist was being difficult

Best Part?

I was back on the road working in less than two weeks. That is a level of service I have never seen from an insurance company before or after. I would highly recommend getting a quote from them, but when I have in the past, they were much higher than others in my area. I tried getting a quote recently, and they only offer it via phone.

Hiscox Insurance

Hiscox is focused on making it easy for small businesses to get the insurance they need. I asked for a quote on a BOP with cybersecurity insurance for a $1 million a year eCommerce store, and the estimate was under $1,500 per year. It took about 10 minutes. 

Cybersecurity insurance covers $250,000 with a $1,000 deductible. That’s a reasonable price, which I will be paying since I just started the business.

Hiscox insurance website showing computation for annual payment

I’ve used this insurance before with a photography company and it was really easy to add and subtract locations when we were working at different locations. They are one of the best for mom-and-pop shops and have most of the insurance options listed in this article. I highly recommend getting a quote from them first. They are who I will use when I get insurance for my business.

How to Get Small Business Insurance

When wondering how to get commercial insurance, you’ll follow a three-step process:

  1. Gather the information you need to provide the insurance company.
  2. Compare quotes from at least three insurance companies.
  3. Buy the insurance that is the best deal for your needs.

Let’s look at what information you’ll need for insuring a business.

Step 1. Gather information you will need for quotes

You’ll need a variety of personal and business information ready when applying for insurance for business. Insurance providers will typically ask for a variety of information in three categories:

  1. Personal information
  2. Business information
  3. Insurance needs

Let’s look at each of these so you make sure you have the information ready to get small business insurance.

Personal Information

The insurance company will need the business owners’ personal information including their name, address, email, and phone number. They may also need a social security number if they run credit checks to provide quotes, which most of the major insurance companies do.

Business Information

To provide coverage, financial products will need business information like:

  • Business structure
  • Small business name
  • DBA (if applicable)
  • Employer identification number
  • Business address(es) for each location
  • Number of employees by business location
  • Employees income
  • Revenue
  • Products sold
  • Net income
  • Products you sell
  • Equipment you want to be covered

Depending on what type of insurance solutions you want for your small business, you will need to provide some or all these. General liability insurance will typically require just the location and business information, but not the number of employees and revenue.

Most of the other types of insurance will require the rest of the information to establish how much it will cost to provide financial protection to the business owner.

What insurance do I need for my business?

A laptop and a cup of coffee on a brown desk

For you to receive expert advice from an insurance company, you’ll need to be able to let them know what kind of coverage you need. The right coverage will be a balance of the type of insurance policies, coverage limits, deductibles, exclusions you want covered, and monthly or annual payments.

Most coverage limits will start with state minimums (or the minimum reasonable amount if not dictated by law) and be tiered based on the specific needs of the business. Higher limits cost more, so you’ll save money by getting the lowest coverage options that exceed your needs. You can add additional coverage as the business grows. You’ll need to know how much coverage you need for each of the following:

  • General liability insurance
  • Commercial auto insurance
  • Employment practices liability insurance
  • Professional liability insurance
  • Workers compensation insurance
  • Property damage based on real estate property values, equipment, and inventory values
  • Any other commercial insurance solutions you desire
  • Income if applying to protect against lost income for business owners

A deductible is an amount you have to pay before coverage begins on a claim. Consider a higher deductible when you get small business insurance to save money.  A lower deductible raises the insurance cost for businesses, but you should still select a deductible you can afford. Most insurance for small business owners will include the following deductible options:

  • $0
  • $250
  • $500
  • $1,000
  • $2,500
  • $5,000
  • $10,000

If you are somewhere with catastrophic events such as hurricanes or wildfires, you might want insurance solutions that provide coverage for those natural disasters. Remember to ask about any specific exclusions to the policy and how you can get insurance against them.

Businesses may need both wind and flood damage coverage, preferably from the same company, to cover hurricanes and tornadoes. You may find this difficult as my family has not successfully found coverage for both from one company in Florida.

The final information you will need as you think about how to get small business insurance is your monthly or annual budget. Inc. estimates you should expect to spend 20-30% of revenue across all types of business insurance, including health care and commercial auto insurance.

The next portion of the answer to “how do I get insurance for my business?” is to contact providers.

Step 2. Compare quotes from at least 3 different providers

When wondering how to ensure your business, make sure to compare the business coverage and quotes from at least three commercial insurance providers.  This helps you find the best pricing and range of services.

Insurance companies offer a variety of business insurance products for small business owners. I’d ask the company that provides your home and car insurance about their business offerings to save time and potentially money. 

Doing the research is a large portion of the time in any business decision. We’ve provided a list from the Insurance Information Institute’s website of some of the largest small business insurance companies:

  1. Chubb, LTD is the world’s largest provider of insurance based on premiums collected last year. Chubb offers more types of insurance than I knew existed and they build each policy for general and professional liability coverage, workers compensation, and other types of insurance you need.
  2. Travelers Companies, Inc. is the second-largest issuer of business insurance by premiums.
  3. Liberty Mutual is the third-largest issuer of business insurance by premiums collected. Check Liberty Mutual for your insurance needs.
  4. Zurich Insurance Group offers property, casualty, and cyber security insurance, as well as risk management tools and insights to help protect your business. Learn more on ZIG’s website.
  5. AIG deals with coverage options for everything from bodily injury to space exploration. If you need an insurance policy for your business, I’m sure you can find one at AIG.com.
  6. Berkshire Hathaway and its children companies tend to provide high-quality offerings if they insure your industry. Find out if Berkshire Hathaway has the types of business insurance you need.
  7. CNA Financial Group offers business owners policies that are tailor-made coverage for multiple types of businesses. CNA coverage options even include ransom and kidnapping insurance for the rockstar CEOs. Learn more about CNA.
  8. Hartford International can be found in my discussion in The Hartford section above.
  9. Nationwide was shared with a link in the section about commercial property insurance above.
  10. Tokio Marine Group is mostly specialty coverage for things like bodily injuries. They have several subsidiaries that operate in the U.S. I’d pass on them given the limitations of their coverage, but here is TMG’s website.

Surprisingly Progressive Commercial, State Farm, and Geico Business aren’t on that list so here are their links:

Keep reading for the final step in the answer to “how do I get business insurance?”

Step 3. Buy the insurance to protect your business

A piece of white paper pinned on a corkboard

Once you’ve gotten at least three quotes, review them to establish which coverage offers the best value for your business. You may have to go with multiple companies to get a full range of insurance that helps protect against general liability, commercial property damage, professional liabilities, and bodily injuries.

Once you’ve decided which policies are best for your business, pay for them. Most of the time, you can either pay monthly or annually. If you pay annually, the insurance company might offer you a discount. If you pay monthly, schedule monthly payments so that you don’t have to worry about remembering the payment date.

Wrapping it up

That concludes our guide on how to get small business insurance coverage. If you have any questions, leave them in the comments below.

We enjoy hearing about business owners’ experiences with small business insurance companies. Do you have a story about an insurance company other business owners need to know? Share it with us below.

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