According to a survey conducted by a leading insurance provider in 2010, nearly 95 percent of small business owners believed they were sufficiently protected against potential risks. However, only slightly half of those same businesses actually had coverage appropriate for their risks. Today, we’re going over what to consider as you determine how much to set aside in your budget for business insurance so you’ll have the coverage you need.
Know What’s Generally Required or Recommended
For budgeting purposes, Inc. points out the general recommendation for businesses is somewhere between 20 and 30 percent of total projected gross sales. Keep in mind specific types of business-related insurance required or recommended typically include:
• Professional liability insurance for protection against negligence
• Property insurance if business property is owned or leased
• Workers’ compensation insurance
• Product liability insurance if you sell or manufacture products
• Vehicle insurance if you have vehicles used for your business
• Business interruption insurance in case your business is disrupted due to a catastrophic event
Start with What’s Required
As you figure out what you’ll need to set aside for business insurance, start with what’s required in your state and for your industry. Also, find out what may be required if you’re leasing a space for your business. In some cases, building owners require leaseholders to have general liability coverage. Workers’ compensation insurance is also typically required in many states.
Assess Risks Specific to Your Business
Evaluate any risks that could apply to your business. For example, there’s going to be less risk involved for an accounting firm than what’s common for a restaurant or larger manufacturing plant. Risks are also likely to be higher if your business is open to the public or related processes are inherently risky.
Determine What You Can Afford to Pay Yourself
Get a feel for what kinds of costs you can realistically absorb. This is why it’s not a good idea to simply go with the cheapest option. The potential issue here is either having to absorb more costs on your own before the policy kicks in or only getting limited coverage. You’ll be much better off obtaining the full extent of the coverage you need in a way that doesn’t leave you with the possibility of being overwhelmed financially.
Consider Additional Factors
Lastly, consider other unique factors that could affect your rates, such as the size of your business and your history of filing claims. It’s typically recommended you overestimate what you’ll need to budget for business insurance. One way to do this is with a commercial umbrella policy that combines several coverage options into one convenient—and often more affordable—policy. You may also be able to keep your business insurance rates in check by:
• Being mindful of workplace safety
• Keeping an eye on employee driving records if business vehicles will be covered
• Taking preventive steps to keep areas accessible to customers/clients safe
Business owners need to make sure they protect their companies and employees by purchasing the right insurance coverage. For affordable, reliable business insurance as well as homeowners, renters, motorcycle, and auto insurance in San Diego residents should call on the trustworthy professionals at Altra Insurance Services. Reach out to us today at (619) 404-6311 to learn how we can satisfy all your insurance needs.