Insurance is one of those important things that no one likes talking about, but it’s an important part of running a successful business. Here are the things to consider when securing insurance.
Takeaways
- Why you need insurance for your company
- Types of insurance
- Why you need a surety bond
- Securing insurance for your employees
Why you need insurance
Some states have insurance requirements. Before you start doing business, check your state requirements regarding workers compensation and disability insurance. Other than regulatory reasons, various levels of coverage and types of insurance may be required when securing a loan, lease, contract, or a license. Surprisingly, around 40% of small businesses don’t have insurance. This may have to do with the perceived high cost of insurance, but leaving your company liable for a multitude of adverse events can prove costlier.
Hearth Insurance Solutions, Inc. (“HHIS”) is here for you if you have any questions about how to get insured and protect your business.*
The risks you face as a business include but are not limited to:
- Natural disasters
- Theft
- Accidents
- Death of important stakeholders
- False advertising or copyright infringement
- Malpractice or negligence
- Product-related injuries or accidents
- Data breaches and more
You need insurance to make sure these don’t break your business’ back.
How to protect yourself
First, you should look for a trustworthy insurance agent or broker. Then, research the risks associated with a business in your industry. You may already be an expert in your field, but a little research doesn’t hurt. Some brokerages will help you bundle different policies into a business owner’s policy (BOP).
When shopping for insurance, it is important you understand the extent of your coverage. You want to make sure critical parts of your business and personal life are covered by the policy. Finally, you need to look at your policy and premiums annually to make sure they make sense for your business as it grows.
General liability
This will generally cover a certain dollar amount for incidents on your property or with your products. It can also be used to cover incidents involving certain legal defense costs or losses due to libel, slander, or copyright infringement.
Commercial property insurance
This covers damage due to natural disasters or vandalism.
Workers compensation
This covers your employees in the event of a work-related incident that results in an injury. This may be required by your state.
Disability insurance
Short and long-term policies address any issues related to off-site injury or illness. This may also be required by your state.
Business interruption insurance
In case there is an interruption in your business’ operations due to external factors, you can rely on this policy to recoup funds.
Employment practice liability insurance (employee related claim for disputes)
This type of policy can cover costs associated with employee-related disputes.
Cyber liability policy
In the event of a data breach, this type of policy protects any damages associated with the breach.
Unemployment insurance
This is a requirement of owning a business and hiring employees, which allows for employees to collect unemployment benefits after they stop working for your company. Each state government has a different program, and tax deductions are calculated during the payroll process.
Commercial auto insurance
These policies usually cover the vehicle and not the driver.
Tradeshow specific liability insurance
Tradeshow booths are an extension of your commercial property. Protecting yourself at these events in case of an incident could be smart.
Surety Bonds
Understanding surety bonds is critical for the success of your contracting business. These bonds cover any liability your company has for incomplete or unsatisfactory jobs due to a number of factors like injury or unforeseen circumstances. These bonds are usually purchased from a surety bond company and the prices for these bonds vary by how much your company needs covered. Typically, these bonds cost 2.5% to 10% of the amount covered by the policy. If the job is $10,000, a bond could cost between $250 to $1,000. Rates are often influenced by your credit score or other factors. Often, a surety bond company won’t issue a bond without proof of good credit, equipment, and expertise. Securing surety bonds are a critical part of securing jobs and subcontracts.
Securing health insurance for your company
Employee benefits are a critical part of your recruitment and retention process. Health insurance is probably the most important of all. There are a few things to know before shopping for health insurance.
The Affordable Care Act requires that companies with 50 or more full-time employees offer employer-based health insurance. To figure out if you have 50 or more full-time employees, use this formula:
(Total hours worked by part-time employees each week / 30) + Number of full-time employees = Your FTE number
There are three types of small business-friendly policies to know about.
Small group insurance
These policies tend to be aimed at companies with less than 50 employees. A benefit is that everyone–employer and employees–buy into the system. One downside is the cost of these programs tend to be higher because of how much they do cover for policyholders. These policies tend to be HMO, PPO, or something similar. You’ll need to consider what portion of the premiums you’d be willing to pay for your employees.
Self-funded
This approach to health insurance requires the company to create a trust fund that pays out on its employees health insurance claims. There are third-party companies that can help recover premiums and process claims for the fund. Although less expensive, a catastrophic event could really hurt the company’s bottom line because it would be liable to fulfill the claim.
Health Reimbursement Arrangement
This tool is rather simple and a novel approach to offering health coverage. Employers can decide how much they want to provide their employees monthly to cover health-related costs. This money can be used to buy insurance or pay for medical expenses. Employees submit their receipts and the company reimburses them.
Before making any decisions, consult with professionals like insurance agents or brokers to find the right policies and programs for you.
*HHIS is a wholly owned subsidiary and an affiliate of Hearth.
