One of the most common questions new business owners ask is whether they need business insurance. It’s a valid question because new businesses have limited assets that need protection. The monthly premium is also an added expense for a business yet to establish itself.
The insurance need for a well-established small business is very different when compared to a newly registered firm. An established business producing thousands of dollars’ worth of products may want separate liability insurance apart from its standard BOP cover. However, a new business still hunting for orders from clients can choose to get a standard BOP that provides umbrella coverage for different types of eventualities.
When to Get a Business Insurance
Buying business insurance should always be done after your business is registered and ready to go. This means buying all the equipment necessary, this may include computers if you are an IT firm or kitchen appliances if you are opening a restaurant. You should also rent or buy a place that will serve as your office. Once you have fully invested and your business is ready to sell, only then should you buy business insurance. This will help the underwriting team from the insurance company to evaluate your assets and risks before making an offer.
What Types of Insurance Policies Do New Businesses Need
If you have rented or bought an office space, the first thing you need is a business property insurance with fire and theft coverage. Eventualities can happen at any time and new businesses are susceptible to bankruptcy if something happens early on.
Once you have your property insured, the next thing you need is a workers’ compensation insurance. This is a type of business insurance for small business as well as large ones that is mandated by law. In other words, it’s illegal to hire an employee in most states and not get workers’ compensation insurance. This protects your employees and provides compensation if they get injured or worse during work.
Another business insurance that’s mandated by law is commercial vehicles’ insurance. It’s important to remember that commercial and personal auto insurances are completely different. However, this only applies to businesses that need commercial vehicles for their operations.
Business Insurance Policies That Are Highly Recommended
Public Liability Insurance: This is an insurance that protects you from litigations and provides compensations if you are sued. Public liability insurance usually come into effect only if your business operation, product, or employees cause damage to property or injure or harm an individual. From customers slipping and falling in your business premises to product defects that end up causing harm, public liability insurance is highly recommended for both new and old businesses.
Business Owners’ Policy: Business owners policy or BOP is a type of insurance that provides both liability and property coverages. This is a great choice for new businesses as it’s cheaper than buying property and general liability insurance plans separately.
Apart from these two optional and the ones mandated by law, other insurance types are specific to industries. For example, if you have equipment or asset that’s very expensive and is the cornerstone of your business operations, you might want to get equipment insurance to cover it.
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