When starting a small business, there will likely be a slew of items on your checklist like getting your website off the ground, marketing your product or even looking at storefront space. Getting insurance should be one of the first things that you tackle as a new business owner. Keep in mind that many states require you to have certain liability coverages (like general liability and workers’ compensation) to protect you in case anything should happen to one of your customers or employees. If you wait until an incident happens to either purchase insurance or understand what your coverage entails, you will likely wind up paying more money for something that insurance could have covered.
As a small business owner, you will need to purchase a variety of different insurance policies to protect your business, equipment and employees. While general liability is one of the first insurance policies that small business owners purchase, this type of coverage doesn’t protect you as the business owner. That is why it’s important to consider commercial property insurance—this type of coverage will protect YOU in the event of an incident, and it also protects the items that you have invested in, like equipment, inventory and your physical space. Keep in mind, it won’t cover everything. When purchasing any kind of small business insurance, especially commercial property insurance, it’s extremely important to ask your insurance provider or agent questions in order to understand what your policy covers and what it doesn’t.
Ask Questions to Understand What Your Coverage Entails
When purchasing insurance, many agents will take the time to walk you through what is covered under your policy and what isn’t. This is the perfect time to ask clarifying questions about what types of events are covered or not under that specific policy to ensure you’re purchasing the exact coverage you need for your small business. For example, “If I don’t own the building, do I need commercial property insurance?” The answer would be yes, but this is something you may not have known unless you tool the time to ask your provider.
When you have commercial property insurance, you’ll have help with replacement or repair costs if property or inventory is damaged due to a covered event, such as a burst water pipe, fire, tornado or vandalism. You’ll also have protection if you experience loss of income due to a covered event. For example, if your restaurant and its inventory like produce and other equipment are damaged due to a burst water pipe, after you file a claim, your commercial property insurance policy would reimburse you for those losses. If you had to close your restaurant during repairs, you may be reimbursed for income loss up to the policy limit.
It’s easy to forget that commercial property insurance covers more than the physical building. There are a variety of other available policies that you can add to your basic commercial property insurance to increase the level of what is protected under your insurance policy. One particularly helpful add-on is equipment breakdown coverage. This type of policy protects your company’s computers, electrical systems, production machinery, and other equipment from sudden and accidental malfunctions. It’s designed to cover losses such as short circuits, loss of air pressure or vacuum, or power surges that the base commercial property policy typically excludes.
Taking the time to ask your provider questions, like what are the non-covered events for this commercial property policy, will give you a sense of any additional policies you will need to research and purchase to ensure that your business is protected.
Breaking Down Common Exclusions and Non Covered Events
Typical exclusions include earthquakes, floods, and pandemics, like COVID-19. This means that if you have to shut down due to a non-covered event, you won’t have financial help. While no one could have predicted the COVID-19 pandemic, it was considered a non-covered event and resulted in more than 100,000 small businesses in the United States closing their doors forever and various lawsuits across the U.S. In a less extreme circumstance, if you operate your business in an area that is prone to earthquakes, like California, it might be worth looking into earthquake insurance and evaluating if it makes sense for your small business.
Covered and non-covered events can be confusing and it’s important to know upfront what your policy entails. If you’re not satisfied with the policy you’re being offered—don’t be afraid to shop around.
Insurtechs make it easier to get the right policy
Typically, insurance is a product that is sold not bought. What this means is that many small business owners rely on their insurance agent to educate them on the types of policies they need to protect their business. With the emergence of digital insurance providers however, finding the right insurance policy has become easier and more transparent. Many offer multiple purchasing avenues, so whether a customer wants to work with an agent or take it on themselves, it’s easy to find a process that works best for their needs. With insurtechs, the entire insurance process is digital, from the initial researching stages all the way to the claims process. This not only makes it easier for small businesses to purchase insurance, but it makes it easier to obtain a certificate of insurance and file a claim.
Many unexpected moments will happen as you launch your small business; Some good, like engaging with new customers and shop regulars, and some bad, like an unexpected kitchen fire at your restaurant. The best thing you can do for yourself and the success of your business is to make sure you’re protected. Insurance is a complicated aspect of any small business owner’s journey, so when in doubt, ask questions and make sure you have the exact coverage you need. Having insurance to protect the buildings and equipment essential to your business will help ensure that your restaurant, boutique or bakery will survive and thrive no matter what happens.
Effi Fuks-Leichtag is Chief Product Officer and Noga Feinberg is Product Manager at NEXT Insurance.