When to buy business insurance

As a small business owner, you don’t have unlimited resources to weather every financial storm that comes your way. 

Whether you’re a sole proprietor or have dozens of employees working for you, maintaining adequate business insurance helps protect you from financial losses due to theft, property damage, lawsuits, workplace injuries or other accidents. Without it, you could be on the hook for tens of thousands of dollars from a single incident.

Depending on where you live and what industry you work in, your state may have laws that require you to purchase certain types of insurance — check with your state’s department of insurance or financial services to learn more.

Plus, clients may need you to have specific kinds of coverage to work with you. For example, if you’re an independent contractor and want to bid on a contract, you could be asked to provide proof of insurance. 

Even if you aren’t legally required to hold insurance, having appropriate coverage can help protect your business from the unexpected.

Types of insurance for small businesses

The insurance coverage that’s right for you depends on multiple factors, including: the industry you work in, whether you have employees, the equipment you have and more.

Here are five common types of small business insurance to consider:
 

  1. General liability. Most business owners start with a general liability policy because it provides coverage for the most common risks you’re likely to face as a business owner.

    This type of coverage helps protect you if you’re held responsible for an injury to someone other than an employee or for damaging someone’s property.

    If a client accuses you of libel, slander or copyright infringement, it helps pay for a legal defense and settlements or judgments that may be awarded if you’re found liable.
  2. Tools and equipment insurance. If you take your tools to job sites, this type of insurance can help pay to repair or replace your equipment if it’s damaged, lost or stolen. You can add this type of coverage to your general liability policy.
  3. Workers’ compensation. Most states require businesses with employees to purchase workers’ comp insurance, which helps pay for medical bills and lost wages if an employee gets hurt or sick on the job.
  4. Commercial auto. Just as your personal auto insurance policy protects your private vehicles, a commercial auto policy helps protect vehicles you use in your business. This type of coverage can help pay for injuries and property damage due to an accident.
  5. Professional liability. Also known as E&O insurance, this type of coverage helps protect you if a client accuses you of making a mistake that harms their business.

    It covers settlements and judgments if you’re determined to be at fault. And it helps pay for legal and court costs to defend against a claim — even if you didn’t do anything wrong.

When to buy business insurance

If you’re getting ready to launch your business, it’s important to buy the coverage you need as soon as possible. If you don’t, you may have to have to pay for all the related expenses after an accident.

But starting out is not the only time you may need to buy new insurance policies. As your business evolves, it’s essential to frequently review your coverage to make sure it still meets your needs.

Here are eight situations in which you may need to purchase additional coverage:

  1. Your policy is up for renewal. At a minimum, you should review your coverage once a year at renewal time. If your risks and exposures have changed since you originally purchased your policy, you may need to buy additional insurance to get adequate coverage.
  2. Your revenue has increased or decreased. The amount of coverage you need is determined, in part, by how much money you make. If you’ve experienced a significant increase or decrease in revenue, it may be time to adjust your coverage.
  3. Your business operations have changed. Different types of businesses need different types of insurance. If you’ve changed your product or service offerings, you may need additional coverage.
  4. You have more (or fewer) employees. The cost of some insurance types, such as workers’ compensation, is based on your payroll and the number of employees you have. If you have more employees working for you now than you did when you bought your policy, you may need more coverage. And if you have fewer employees, you may need less insurance.
  5. You moved. Have you outgrown your home office? Did you move to a new building in a different part of town? Have you opened additional locations? If you answered yes to any of these questions, it’s time to revisit your policy and adjust your coverage accordingly.
  6. You bought vehicles. If you purchased cars or trucks to use in your business, you’ll need to buy commercial auto insurance — or add the new vehicles to your existing policy, if you have one.
  7. You bought new equipment. Did you recently buy a new excavator for your construction business or a lawnmower for your landscaping company? If so, you may need additional insurance, so you have adequate coverage if the equipment needs to be repaired or replaced.
  8. You changed your business structure. Whether you moved from a sole proprietorship to a partnership or an LLC to an S Corp, if you changed your business’s structure you may need to update your insurance coverage to make sure you’re adequately protected.

How much is small business insurance?

Because insurance companies use so many different factors to determine the price of insurance, there’s no such thing as a “typical” cost for business insurance. The price is unique to each business and is based on the type of coverage you need and the amount of risk your business is likely to face.

In general, insurance costs more for businesses in industries that are considered more dangerous. So if you own a construction company where your employees are working with a lot of heavy machinery, you’ll probably pay more than a graphic designer who sits at a desk all day.

Also, companies that have more employees typically pay more than businesses with fewer employees. But you won’t be able to get an accurate estimate until you complete an application and get a quote based on your business’s unique exposures. 

How to get insurance for a small business from Next Insurance

We make it easy to get a quote and buy business insurance with an online platform that is supported by insurance experts.

Since no two businesses are alike, we create customized insurance packages tailored to meet the needs of each small business we serve, so you pay only for the coverage you need and not for anything you don’t.

Simply answer a few questions, choose the package you need and get your certificate of coverage, all in about 10 minutes or less.

You’ll save 10% when you purchase two or more policies together. And if you have questions, our licensed, U.S.-based insurance advisors are ready and waiting to help.