Small business owners have a lot on their plate, from hiring and retaining employees, to managing marketing, sales and even, in some cases, merchandise planning. As a result, they sometimes overlook things that could be central to the health and longevity for their business. Business insurance is one of those things. In fact, 90% of the 500 U.S.-based small business owners surveyed by NEXT Insurance said they are not confident that their businesses are properly insured.
Small Business Xchange (SBX): What are some of the most common questions that small businesses have about commercial insurance?
Anne Russo: People tend to know they need insurance, but they don’t know what they need or why they need it. They want their business to be protected, without spending a lot of money and for someone to coach them through the options. They don’t want to have to think about it again. Ultimately, they want to feel safe and know their business is protected.
SBX: What aspects do they frequently overlook or misunderstand that may get them into hot water?
Russo: There are two key areas that small business owners tend to overlook. The first is property. Knowing the value of your property is critical, especially if they own the building. A bank telling you the value of your building might be different than what it would take to replace it. There can be a difference between market value and replacement cost. Then, there is liability. It’s important to be aware of how your incorporation status impacts your risk exposure. For example, a sole proprietorship or partnership may have their personal assets exposed. Even if you have only one employee, you’re exposed to employment practices liability risk. It’s almost impossible to be a business without using technology. Hackers also tend to target small businesses because they know they don’t have the same level of protection as a larger business.
Working with an independent agent who understands your business can help you manage risk exposure. After all, just because you’re a small business doesn’t mean you can’t experience a big loss. An agent would understand what a retail business would need versus a beautician.
SBX: To that end, how does business industry and size impact the risks and, in turn, types of insurance business owners should get?
Russo: The size and industry of a business might impact the number of vehicles on the road or the number of employees, both of which increase your exposure. The same thing goes for the number of locations. As you increase the number of locations, exposure can be more difficult to control. There are also specialized coverages you may want to consider based on your industry. Again, this is where an independent agent’s expertise comes in. For example, a barber shop has professional liability exposure. That coverage might be included in your policy, but it might not be. Your agent should know whether that is already included in your policy or if you should consider additional coverage. Another example is workers compensation. There are several factors at play, from the state you’re in to the number of employees. It may also be appropriate to explore additional limits
SBX: What key factors should small business owners consider while researching and selecting a commercial insurance provider and plan?
Russo: Small business owners should consider how much risk they can afford to retain. For example, if you can afford a higher deductible, you can decrease the cost of your premium. Small business owners should also look for an independent agent with experience in their industry. It’s important to be able to speak to the day-to-day operations with your agent so they can identify exposures a business owner may haven’t considered.
SBX: Are there any other risk factors that small businesses should prepare for and possibly onboard external support?
Russo: Yes, cybercrime is definitely a risk factor small business owners should be aware of. It’s also important to have a plan to deal with exposures that can’t be insured by a standard carrier, which is also something an agent can help with. That could entail specialty coverage, or having a contingency plan in place in case things go wrong.