Depending on your circumstances, business insurance can seem like a considerable expense.
If you’re a new business owner, in particular, you’re probably trying to keep costs down wherever possible, so you might be tempted to put off getting insurance until you really need it.
That’s the catch: How do you know when you “really need it”?
We’ve got you. Here are five signs that it’s time to get coverage for your small business.
When You Want New Clients.
We all know that a business is only as good as its reputation, and if you’re just starting out, you have to build that reputation from scratch. Potential clients may not know much about your business, but they know what they want: a trustworthy, dependable organization.
They’re looking for signs that you’re serious about your craft and committed to their satisfaction. Proof of insurance is one way to show this, to say, “I’m ready to do this job the right way.”
At the same time, a certificate of coverage can help set you apart in a crowded marketplace. If a prospect asks about proof of coverage, being uninsured can give the impression a business is less accountable than its insured competitor. Having insurance helps you win new business.
When You Invest in Equipment.
Say you have a property maintenance company and you’re ready to bid on larger jobs, but you need a new deck mower to compete. Or you’re a makeup artist with an expensive kit for on-site photo shoots.
As an entrepreneur, your tools and equipment are your lifeblood. They can take a bite out of your budget too, especially if you’re just starting your business. So, what if that mower breaks down or that makeup kit is stolen?
If you’ve invested in good equipment, make sure it’s protected.
Business insurance — like equipment breakdown or contents coverage — can help. Whether a loss is due to a mechanical breakdown, accidental damage, or even theft, having the right coverage can offset the repair or replacement cost of items you rely on for your business.
Insurance is a vital part of your professional safety net. Are you really comfortable working without a net?
When You Hire an Employee (Even a Part-Time One).
There’s a good chance your state requires workers compensation insurance when you hire your first employee. Even if it’s not legally required based on your location, it’s still a good idea to have a workers comp policy.
For starters, a workers comp policy can help attract high-quality talent. While you’re interviewing candidates, remember that they’re interviewing you, as well. They want to know that you’ll be a responsible employer. Having workers comp coverage shows that you’re prepared for the unexpected and that you care about the well-being of your staff.
While it helps protect your employees, it also supports your productivity.
After all, you’ve gone to the trouble of hiring and training someone new. If a team member gets sick or hurt on the job, workers comp helps cover medical costs and lost wages. With appropriate medical care, an injured worker can recover and get back on the job more quickly, which makes everyone’s life easier.
And remember, without insurance, you might have to pay those medical costs and lost wages out of pocket. That’s a risk no small business owner should take.
When You Sign a Lease.
Your first location! Signing a commercial lease is an exciting time, whether it’s for a small storefront or a large warehouse.
Don’t be surprised if the lease includes a clause requiring you to have business insurance. Tenants in commercial spaces are typically required to have coverage — in particular, commercial general liability (CGL).
CGL is a lifesaver when it comes to third-party injuries or property damage.
For example, say a customer entering your store slips on the tile floor and hurts her knee. If she files a personal injury claim against your business, CGL helps protect you by covering costs related to the claim.
Or maybe you’re a handyman who leases space for a small repair shop. A storage rack collapses and damages several items scheduled to be picked up by your clients. With CGL, you won’t have to pay those costs; your policy will cover any damage to third-party property.
It’s not just storefront leases, either. If you want to show off your company at a trade show or schedule an event, the venue may require proof of insurance coverage in order to rent space to you — even for a temporary space. Having business insurance means you’re prepared for new opportunities.
When You Don’t Sign a Lease.
So you work out of your home, perhaps as an accountant, graphic designer, or freelance writer. You’ve converted part of your house into an office and you don’t need to rent a separate commercial space. Sounds good, right?
The insurance company that provides your homeowners coverage may not think so, especially if you haven’t told them about your home-based business.
A standard homeowners policy typically doesn’t cover loss of income, loss of inventory, or legal expenses, among other things. If a thief breaks into your home and steals your work computer, you could be out in the cold as well. It’s a headache that’s easily avoided, however, with the right coverage.
Often, you can add home-based business coverage to a homeowners policy, especially if it’s just you and a laptop. Another valuable option is stand-alone coverage for your home-based business — a good choice If you have a lot of inventory or a steady stream of clients in and out.
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This content is for general, informational purposes only and is not intended to provide legal, tax, accounting, or financial advice. Please obtain expert advice from industry specific professionals who may better understand your business’s needs. Read our full disclaimer
*Harborway Insurance policies are underwritten by Spinnaker Insurance Company and reinsured by Munich Re, an A+ (Superior) rated insurance carrier by AM Best. Harborway Insurance is a brand name of Harborway Insurance Agency, LLC, a licensed insurance producer in all 50 states and the District of Columbia. California license #6004217.