How to Get Business Insurance: The Ultimate 4-Step Guide

This guide covers types of risk, how to shop and compare quotes and more.
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Written by Randa Kriss
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Whether you're the owner of a brick-and-mortar shop or an online-based contractor, finding and buying the right business insurance is essential to protecting your operations from the unexpected. However, with all of the different types of insurance out there, as well as providers to choose from, you might be wondering exactly how to get business insurance.

In this guide, we'll break down four simple steps you can follow to insure your small business — from reviewing your risks to choosing the best policies for your needs.

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How to get business insurance

Although buying small-business insurance might seem intimidating at first — especially if you're a new business owner — the process can be much more approachable if you break it down into individual steps:

1. Review your risks and decide which types of insurance you need

First and foremost, you'll need to decide which type, or types, of commercial insurance you need. From the overarching liability insurance to the more specialized cyber liability insurance, there are a variety of coverage options to choose from — and the policies you need will largely be unique to your business.

Therefore, to help you decide which types of insurance you need, you can start by evaluating your risks as a business. As you might imagine, some businesses will be inherently riskier than others — a manufacturing or construction business, for example, will pose a much greater risk than a home-based e-commerce business.

Evaluate your risks

Although some risks will be unique to your business, location and industry, in general, you can think about:

  • What kind of accidents your business might be prone to: For example, a brick-and-mortar shop poses much more risk for a slip and fall accident than a home-based business.

  • What kind of natural or unexpected disasters might affect your business: You might think about things like floods, earthquakes, fires, hurricanes, etc.

  • Who staffs your business: Do you have employees? If so, you'll need to protect them and your business with certain policies.

  • What kind of lawsuits could your business face: For instance, if you manufacture your own products, you're more likely to face a business lawsuit for product defects than other types of businesses.

Once you have a better sense of the risks that your business faces, you'll be ready to look into the different types of commercial insurance and decide which ones your business needs.

Choose the right type of insurance

When it comes down to it, there are numerous insurance types to choose from, but you might start with some of the most common options:

  • Workers' compensation insurance: If you have employees, workers' comp insurance is required — although the details vary by state. Workers' comp insurance protects your employees in case they become ill or injured on the job.

  • General liability insurance: This is one of the most common types of insurance and all businesses should invest in this type of coverage. General liability insurance protects your businesses from claims of bodily injury, property damage or personal injury by a third party.

  • Commercial property insurance: Commercial or business property insurance protects your equipment, office space, inventory and more from loss or damage. This type of policy will be particularly important for businesses that operate out of a brick-and-mortar location.

  • Professional liability insurance: This insurance, sometimes referred to as errors and omissions insurance protects professional-service businesses (designers, consultants, accountants, etc.) from claims of negligence or other service-related errors. Professional liability insurance is necessary for any business that provides expert advice.

  • Product liability insurance: If your business sells any type of tangible product, product liability insurance will protect you from any claims related to defects in those products, including manufacturing, design and marketing defects.

  • Business interruption insurance: If damage or disaster causes your business to temporarily shut down or slows business, business interruption insurance can help make up for lost revenue.

  • Cyber liability insurance: Cyber liability insurance covers claims and costs incurred when your customer data — or any data that has personally identifiable information — is leaked or stolen. This type of policy is important for any business that stores data on the cloud or on an electronic device.

  • Directors and officers insurance: D&O insurance protects the personal assets of directors and officers, should they be sued personally based on a decision made or action taken on behalf of the company. This one is particularly important for business owners with outside investors or in regulated industries.

  • Key person insurance: Key person insurance is akin to a life insurance policy for essential members of your business. In case something happens to this "key person," your insurance provides funds to help you cover losses and hire a replacement.

  • Business owner's policy: A BOP combines multiple types of commercial policies into a single more affordable bundle. Business owner's policies typically include general liability insurance, commercial property insurance and business interruption insurance; however, many providers allow you to customize these policies to add other types of coverage as well.

Of course, although there are a number of different types of commercial insurance, not every business will require the same coverage. The policies you need will be unique to your business. Moreover, when you're first figuring out how to get business insurance, you can always start simple, with a general liability policy or a BOP, and opt for additional coverage later on.

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2. Shop around and get quotes

Once you have a better sense of what kind of insurance your business needs, your next step will be to start shopping. You'll want to get business insurance quotes from several companies so that you'll be able to compare multiple options and find the best deal for your business.

So, how do you go about this part of the process? When it comes down to it, you have three avenues you can take:

Use a broker

To start, you might opt to use an insurance broker. If you're learning how to get business insurance for the first time, leaning on the expertise of a broker can be particularly useful.

Working with a commercial insurance broker is similar to working with a business loan broker or a health insurance broker. You'll discuss your business's needs with the broker and they'll come back to you with quotes and coverage options from different carriers. You'll then compare the options and be able to choose the right one for your business.

Of course, although expertise and network are two of the most notable benefits of working with a broker, it's important to remember that brokers work on commission — so you'll want to make sure that any broker you work with as your interests in mind first.

To this point, if you decide to utilize a broker service, you'll want to keep the following tips in mind:

  • Specialization is key: Although you might be inclined to utilize the first reputable broker you come across, if you take the time to find a broker that specializes in your industry, you’ll get way more value out of the exercise. A good broker that's experienced in your industry will help you get business insurance that is less of a contractual burden and more of an investment, allowing you to mitigate your risks and grow your business.

  • Vet for knowledge and technique: First and foremost, you'll want to vet your broker to ensure they're reputable. You'll want to ask to see reviews and references before working with them. Additionally, you'll want to vet the broker's expertise in your industry, as well as how they operate to ensure that the person is the right fit for your needs.

  • Stick to one broker: Once you've found a reputable broker in your industry and have started a relationship with them, you'll want to stick with that person. Although it might seem advantageous to work with more than one broker to diversify your options, it will likely be more difficult to keep track of multiple processes and may even delay the quoting processes. If you end up deciding that the first broker isn't right for you, be open and honest — end that relationship before searching for a new one.

Use an insurance marketplace

Alternatively, you may determine that working with a broker isn't right for your business. In this case, you might decide to utilize an online business insurance marketplace, like CoverWallet and Simply Business.

These insurance marketplaces work with top providers and can offer multiple quotes from their partners so that you can compare your options without having to contact each insurance company individually. All you have to do is input some basic information about your business and the insurance you're looking for — and the marketplace will generate multiple free quotes from their partners.

Then, you'll be able to compare the quotes and even talk to insurance experts to decide what's best for your business. Compared to working with a broker, using an insurance marketplace allows you to take a hands-on approach to your insurance search — it also expedites the process, as well as gives you access to industry experts to help you make the right decision.

Contact individual providers on your own

If you have simple insurance needs or already have a provider in mind, there's nothing wrong with contacting providers directly to learn about what they offer, receive a quote and decide whether or not their coverage is right for your business. Of course, contacting different insurance companies, discussing your business needs with their representatives and receiving multiple quotes can be time-consuming and overwhelming — so this is something to remember.

However, as we mentioned, if you already know you want to work with Hiscox insurance, for example, it will certainly be simpler to contact them directly. Additionally, if you're a smaller business and know that you only need one specific policy, it may be more efficient to work with the insurance providers themselves.

3. Compare quote options and determine what's best for your business

Regardless of which of these three methods you use to get insurance quotes, your next step will be to compare the quotes and determine which policies and which provider is best for your business.

Of course, this will be one of the most important pieces of learning how to get business insurance, so you'll want to review each of your quotes thoroughly, ask questions and perhaps even consult your business advisors for their input.

This being said, insurance policies aren't always simple, so as you're comparing different quotes, here are a few items you'll want to keep in mind:

  • Coverage of policy: First and foremost, whether you're purchasing a single policy, a bundled policy or multiple separate policies, it's important that you understand exactly what is and isn't covered under each policy. Although it may be tedious, you'll want to read the fine print and ask a representative (or your broker) any questions you have. For instance, if you're purchasing commercial property insurance, you'll want to determine what kind of disasters the policy covers. Not all policies cover floods, for example, so you'll want to be sure you know specifically what type of coverage any particular policy entails.

  • Limits of liability: Distinct from coverage, the limits on your policy will tell you how much of a loss the business insurance company will actually cover. For example, the limits on a general liability policy are typically $1 million/$2 million. In other words, $1 million is the occurrence limit, the total compensation available for any one claim or loss. The aggregate limit, on the other hand, is $2 million — the total that can be paid out over the entire policy period, which is usually one year. As you might imagine, the higher limits you need on your policy, the more you'll pay for the policy on an annual basis.

  • Premium and deductible: Speaking of costs, the price of the policy will certainly be important to consider. The premium will be your annual or monthly cost for the policy — general liability insurance, for example, usually costs around $500 per year. Of course, the greater your coverage, the higher your limits, and the more policies you need, the higher your premium will be. This being said, however, another integral part of the cost is your deductible. Whether or not you have a deductible and how much it will be will vary based on the type of policy and the insurer, but overall, the deductible is the amount of money you'll pay out of pocket before your coverage kicks in. Generally, the higher your deductible, the lower your premium — and vice versa.

  • Payment terms: How will you pay for the policy? Are you billed by the broker ("agency bill") or carrier ("direct bill")? Is payment on the policy due upfront or in installments? Are you billed on an annual, monthly or some other basis? You'll want to understand how the insurance company charges you for the policy and how you can make payments — as this information will be important for your cash flow and accounts payable.

  • Carrier rating: Finally, you'll want to ensure that the insurance carrier you're working with is a reputable one. To do so, you can look at their A.M. Best Rating. The A.M. Best Rating system is a letter grade system that shows the financial health and operating performance of a company. Generally, an A- rating or higher is considered strong, so you'll want to see where any carrier falls before agreeing to a policy from them.

All in all, it's worth remembering that the best insurance policy for your business will not only be one from a reputable carrier with the coverage you need, but also one you can afford.

To this point, if you're operating on a tight budget and need to save money on business insurance, opting for a business owner's policy can be useful. By bundling multiple policies together in this way, you'll usually be able to access lower premiums.

4. Purchase your policies and keep them up to date

At this point, you've learned how to get business insurance and the last step is to actually purchase your policy or policies.

Once you've done so, you'll want to ensure that you know when payments need to be made, how to file a claim with your provider and how to reach out to customer service if you need assistance.

Luckily, many insurance providers have online customer portals that you can use to make payments, file a claim, contact support, add additional insureds or request a certificate of insurance.

This being said, however after you buy your policy and set up payments, you won't just want to leave things until you need to file a claim. Instead, you'll want to ensure that you review your policy periodically — and decide whether you need to adapt or change your coverage.

When to reevaluate your coverage

Typically, a good time to reevaluate your coverage is on an annual basis, when your policy will be up for renewal. At this point, you'll be able to take another look at your business and potential risks to decide whether to renew, change or cancel your policy and switch to another provider altogether.

Additionally, you'll also want to reevaluate your coverage if you have a big change in your business. For example, if you hire your first employee, you'll likely need to add workers' compensation insurance to your policy. On the other hand, you might purchase a new piece of real estate and decide you need to add or expand your commercial property insurance.

In any case, your insurance policy exists to protect your business, so as your business grows and changes, your coverage will as well. If at any point you think you need to change or adjust your policy, but aren't sure what exactly you need, reach out to your broker or a representative from your insurance company to discuss different coverage options.

This article originally appeared on Fundera, a subsidiary of NerdWallet.