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How to Choose the Right Commercial Insurance

You’ve finished your business plan, acquired investors, and are ready to launch your business. The only thing left to do is get commercial insurance before you open your doors.

Getting the right insurance helps your company to manage risks and is one of the most important keys to success in any business venture.

Every business is different, facing various risks, concerns, and operating in different places. Due to the many factors that have to be considered in choosing a commercial insurance policy, the process can seem overwhelming.

While the details of each business’s policy will be unique, there are some important fundamentals to be aware of before you get started to help you plan accordingly. 

What is Commercial Insurance?

Commercial insurance is a broad class of insurance, usually general liability insurance, which protects companies against general business risks. Having the right commercial insurance policy helps business owners to mitigate risk, protect against losses, and meet legal requirements.

Commercial insurance is for companies of all sizes, whether you have a Fortune 500 company, a small business, or a musical troupe looking for brass band insurance. This kind of insurance not only shields your business from all types of hazards but also protects your employees and property too. 

There are different types of commercial insurance policies that your business should look at to determine what kind of coverage you need.

  • Property Insurance
  • General Liability Insurance
  • Business Vehicle Insurance
  • Workers’ Compensation Insurance
  • Product Liability Insurance
  • Professional Liability Insurance
  • Business Owner’s Insurance (Umbrella Policy)

Assess Your Risks

Some businesses choose insurance randomly, simply to be legally compliant with federal laws. This method, however, can quickly backfire, as one-size-fits-all policies are not always appropriate for your needs. You may end up paying too much for coverage you don’t need or find out too late that something important was missing from your policy. Bad news all around.

For example, 1 in 5 small businesses encounters a burglary or theft incident at some point in their operation, which can cost up to $8,000 without insurance coverage. More serious issues have the potential to affect your business down the road too, costing far more in financial and reputational loss. 

Protecting yourself and your business against liability and financial ruin is the main purpose of commercial insurance. Choosing an insurance company and policy can be a complicated process but it doesn’t have to be, as long as you go into it as informed as possible. 

When deciding on the right commercial insurance for your business, the first thing you need to do is to assess your risks based on your location, industry, and the size of your business. 

Broker or Agent?

Before you decide on using an agent or broker, it’s best to know exactly what each one is and how they can benefit you. 

Agent

Insurance agents work directly for one or more insurance companies. They often know the ins and outs of the policies that they deal with and can rapidly compare policies that they represent. They do work on commission, but they will have an in-depth knowledge of the policies that they represent and are authorized to bind the coverage. This means they’ve authorized the policy and it’s active. 

Broker

Insurance Brokers work directly for the consumer. They also work on commission, but they are not affiliated with any particular insurance company and work directly with their clients to find the best possible coverage for them.

They act as an intermediary between insurance companies and clients. The one downside is that they’re not able to bind the coverage and need to connect the consumer with the agency to finalize the policies. 

Commercial insurance is not mandatory for every business, especially small businesses. Some states and even industries, however, do require it before a business is allowed to operate. 

Check the local, state, and federal laws to find out how much liability insurance you’re required to have for the size and scope of your business. If your company deals with manual labor, you’ll need to make sure your commercial insurance policy has some kind of workers’ compensation plan. 

Every business is different and will have a variety of risks that apply to their industry in particular. Think about what possible issues your business may encounter to choose the best insurance coverage for your unique situation. 

How to Save Money on Insurance Premiums

All insurance companies use similar criteria to calculate the final cost of commercial insurance premiums. Understanding these factors can help you keep your premiums at a reasonable rate.

  • Location of Business
  • Claim History
  • Driving Record
  • Credit Score
  • Any prior break in coverage

All of these factors work together to determine the cost of your commercial policy. You can help keep your premiums lower by maintaining consistent coverage, a high credit score, a good driving record, and not filing frivolous claims. 

Compare, Compare, Compare

The best way to make a decision about the right commercial insurance policy for you and your business is to get quotes from several insurance companies and compare them. Asking the right questions will also help you to make the right decision for your needs.

  • What does Company A offer versus Company B? 
  • How much is the monthly premium for Company C? 
  • Does Company D have hidden costs?

Once you’ve made a shortlist of plans and providers, compare them to each other side by side to see what each one offers or lacks. Be sure to thoroughly research each company and read the fine print before making anything official. 

Plan for the Future

As your business grows and expands in the future, you’ll need your insurance policy to do the same. A generic Business Owners Policy might work for now, but what about two years from now? 

Starting a relationship with a reliable agent or broker now can help your business in the future when the needs of your company change, and your insurance policy needs to be updated. Be smart by playing an active role and periodically reviewing your policy and insurance coverage to stay ahead of the curve and protect your business. 

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