This might come as a surprise to some, but getting the right insurance for your business might be one of the most important decisions you'll make as a business owner. The consequences of INADEQUATE coverage, or no coverage, could be devastating. There is a whole world of things that can happen to you and your business. Not protecting yourself and your business with the right insurance could cost you in so many ways.
DON'T WALK INTO IT BLINDLY
Doing it right essentially means avoiding some common MISTAKES made when trying to get the best insurance policy for your business. Knowing what some of these mistakes are, and avoiding them in the future, will help you in your quest to simply make the right business decision when it comes to insurance. Here are some mistakes to avoid:
DISCOUNTING THE IMPORTANCE OF BUSINESS INSURANCE
Business people of all types, whether it be presients of large business conglomerates, or even someone just working out of their home office, have their own set of REASONS for getting insurance specifically for their business. But not all business people necessarily think this way. Some think it might be too costly. Some think it might not be necessary . Some may even think that they're covered by other insurance policies that they have for their property or for themselves.
A FALSE SENSE OF SECURITY
Not having the insurance specifically tailored for your business often comes as a result of simply not thinking that it's NECESSARY. But it is. Take general commercial liability insurance, for example. This kind of insurance protects businesses from the costs of lawsuits resulting from basic damages done to people or property that have even the slightest contact with what you do. Not having this coverage when someone decides to throw a lawsuit at you, even if frivolous, could cost you in terms of money and reputation.
NOT KNOWING THE BASIC ISSUES
It's nice to think that insurance is just insurance, but it isn't. Would you get car insurance for you house? Would you get life insurance for your healthcare? Of course you wouldn't. Yes, some of the issues involved in business insurance are similar to other forms of insurance. A good policy will, for example, protect your ASSETS in case they get stolen. It will also protect you if bad weather destroys your business property. These are straightforward insurance issues for your business. But don't be fooled into believing that they're the only insurance issues for your business.
UNDERSTANDING GENERAL COMMERCIAL LIABILITY INSURANCE
For example, take general commercial liability insurance. Some business owners might not even know what liability insurance actually is. It's the insurance that protects you from the financial costs resulting from a lawsuit from somebody who claims they or their property has been HURT or injured as a result of the way your business conducted itself. General commercial liability insurance is the kind of insurance those companies engaging in commercial activities get to protect themselves because people hurt themselves on their premises or one of their products did damage to someone's property. Being knowledgeable about these kinds of things will most certainly help you get the right insurance.
NOT GETTING INSURANCE EARLY ENOUGH
There are two things that can happen to you if you don't get insurance for your business early enough. The obvious one is that you'll need it before you get it, and you'll be stuck with paying for the DAMAGES from a storm or a lawsuit yourself. The other thing that can happen is that you will not have a budget for your start-up for the proper insurance, so you'll get stuck with inadequate coverage. That's the last thing you want to happen. Therefore, to avoid it, thinking about insurance as early as possible, even at the business plan stage, will help you create the budget you need to get you adequately covered for all future circumstances.
GETTING THE WRONG KIND OF INSURANCE PROVIDER
Perhaps the most tempting option for someone seeking business insurance is to get it through insurance companies they're already doing business with. So, for example, you like how your house is covered, and who's covering it, so you'll seek to extend that coverage to your business, too. The reason this is inadvisable, or should at least be looked at very carefully, is that your property insurance provider might simply not have the kind of EXPERIENCE with the kind of insurance you need for your business. Ideally, only those companies and agents who have dealt with your kind of business before can help your kind of business get you adequately covered for your particular situation.
GETTING THE WRONG KIND OF COVERAGE
Following from the risk of getting the wrong insurance provider, a mistake to avoid is getting the wrong kind of coverage. You're the best person suited to look out for your own interests. No one else is. That's why it's incumbent upon you to make sure you've got the right coverage for you and your situation. An AGENT can help you understand the different kinds of insurance available -- do you need disability? Key man? Product liability? Errors and omissions? But ultimately, you're the person in charge of making the right business decisions for your company -- and you need to fully understand your risks and the options for alleviating those risks.
IT'S UP TO YOU
In the end, it's you who has to decide if you have the right kind of coverage for your business. After going through the entire process, collecting all the information, and talking to the right people, it's you who makes the decision. Make sure it's the RIGHT one for your business and where you want to take it.
James Cochran is the founder of Business Insurance Now, a web-based business insurance agent. With over 12,000 business clients, Business Insurance Now and Techinsurance have grown to become America's leading online provider of general commercial liability insurance for a wide range of small businesses.
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