small business
Commercial insurance form on a table.

By Atul Kulkarni

Small businesses are an enormous part of the American economy. The U.S. Small Business Administration estimates that the sector employs over 56 million people and accounts for more than 98% of all companies from coast to coast. Like any industry, small businesses face their own separate and unique challenges, including funding, regulation, marketing, customer acquisition and more.

Guarding against losses and specific liabilities is one of a small business owner’s most important tasks, and insurance purchasing decisions should not be taken lightly. Owners run the risk of being either underinsured with unforeseen coverage gaps, or overinsured and over budget.  So what are the most important questions that small business owners should ask themselves before purchasing a policy?

Do customers come onto your premises?

If customers, vendors or any other members of the general public are regularly on your premises, it’s imperative to ensure you have adequate premises liability limits. Slip, trip and fall claims can be costly for a business owner, even when you’ve taken proper precautions to protect your property. Here at Allianz, we recommend a minimum limit of $1,000,000 per occurrence.

Do you own or rent your property?

Whether you own or rent your business location, you probably have a need for property coverage. Even business owners who operate out of their home may need to cover business property, such as raw materials and inventory, as this may not be covered under a homeowners or renters policy.

Should I consider purchasing a BOP policy?

A Business Owners Policy (BOP) protects small businesses from the most common risks such as fire, burglary, liability and business interruption. A BOP is convenient for small business owners, as it bundles multiple policies together, reducing the need to purchase multiple policies.

Do you offer advice or professional consulting or services?

If you are a consultant or professional offering advice to clients, consider adding Errors and Omissions coverage to your policy. Not only is this a requirement for securing projects from most clients, it will protect your business in case you are accused of negligence or the failure to perform your professional services.

Do you have employees?

If you hire employees to work for your business, then you’ll need workers’ compensation coverage for them. Coverage requirements vary by state, but it is always a good idea to protect your employees in case of injury.

Do you use vehicles for business?

If you own commercial vehicles or even use a personal vehicle for business purposes, you’ll need coverage under your business policy.

How can you lower insurance premiums?

Having a proper risk management program and procedures in place may help reduce losses and in turn reduce your insurance rates and premiums. You may also be able to lower your insurance premiums by increasing your policy deductible.

Have you reviewed your insurance policy in the last year?

New operations?  Expanding locations? Additional employees? Ensure your business is adequately protected by reviewing your business risks and insurance policy every year with your independent insurance agent or broker.

Once a small business owner has answered these questions, they will be able to make a more informed decision on which insurance coverage is right for their business.  There are a lot of uncertainties in business, but a comprehensive insurance policy that protects you, your employees, inventory and property can provide financial security and peace of mind.

Atul Kulkarni is the Head of Small Commercial for Allianz Global Corporate & Specialty in North America & Alex Toplansky, Senior Business Analyst.