What to consider before you buy business insurance
Are you one of the many businesses affected by COVID-19 shutdowns during 2020? While many insurance options didn’t cover commercial space shutdowns, there are many options that carry over into 2021 and beyond.
Some of those include loan forgiveness and the Paycheck Protection Program or PPP.
But even these wouldn’t be necessary if you had the right kind of business insurance, to begin with. Something like custom-tailored business interruption insurance, for example.
How do you know what you need, when no one could predict the pandemic? Keep reading to find out!
Business Insurance for Your Commercial Space
There are so many kinds of insurance coverage, clauses, and companies. Sometimes it’s hard to know what is mandatory in many states, like workers’ compensation insurance, and what’s simply a good idea.
There are generally six different kinds of insurance types to look at for small, medium, and large businesses alike. The six types, outlined in detail on the U.S. Small Business Administration Business Guide, are:
• General liability insurance
• Professional liability insurance
• Product liability insurance
• Home-based business insurance
• Business owner’s policy
• Commercial property insurance
If you’re a small business, there are a lot of “off-the-shelf” options, but only about half of small businesses ever get insurance.
For example, commercial property insurance would be good for a small business that has a storefront. In 2020 there were many protests around the country that may affect a small business like this. Commercial spaces are physical assets that need protection, just like cars, and this type of insurance can be written to cover vandalism and civil disobedience.
What Other Business Coverage Can My Business Get?
If you’re a medium-sized business that has specific needs, it can even be written into a captive insurance plan. A captive insurance company is one that is a company formed specifically to insure the risks of the business affiliated with the captive insurance company.
Section 831(b) of the Internal Revenue Code allows for 0% federal income tax rate premium payment plan. The cap on these premiums is now $2.3 million.
Why bother with a captive insurance plan? Many insurance policies have gaps or lack of coverage for medium size companies. Captives give more control to a business over an insurance program and even allow for certain secured loan situations if necessary.
Things to Consider Before You Buy Business Insurance
Now that you know there are various options for your business insurance, you need to run down a checklist before you buy one.
1. Look for insurers with good reputations
2. Think about your company’s specific potential risks in advance
3. Get the coverage you need, even if it’s more expensive
4. Read the terms and conditions very very closely
5. Be versed in state regulations and laws around insurance requirements
6. Don’t underestimate your needs, overestimate if you must
Buying low-cost insurance just to have it may give you more gaps in your coverage than you realize. Don’t only get insurance because you need worker’s compensation or general liability insurance. Make sure you buy business insurance that has quality.
Business Insurance: Covered
Your commercial space shouldn’t go uncovered or covered to the bare minimum. 2020 took a lot of businesses completely off-guard, but the future doesn’t have to do that to you.
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