Starting a business can be daunting. Whether you’re going all-in or just looking for a side hustle, there are multiple financial dangers that you will be facing. The data provided by the Bureau of Labor Statistics suggest that among all businesses, only 80% would survive after a year, only 50% would be able to make it through their fifth year, and only around 30% would survive after a decade in the industry.
To ensure your spot within that 30%, you have to know the ins and outs of the industry. And one of the most important pieces of information you need revolves around your business’s insurance.
Here’s what you have to know before you start a business:
Consider aspects where you are at risk.
Do your research and try to fully comprehend the risks within both your industry and your business itself. Different types of business industries face different dangers.
If you’re leaning on starting a service-providing business like your own clinic, a simple mistake made by your attending physicians can lead to a medical negligence lawsuit. And it might turn into malpractice if proven that it was done intentionally. Professional liability insurance can help with that.
On the other hand, product-based businesses like restaurants and retail shops should focus more on liability insurance for their products. If the food you served or the cosmetic product you sold put your customer in harm’s way, product liability insurance can cover the legal bills.
Know every type of business insurance there are.
Knowing what you’ll exactly need is helpful. But it won’t hurt to get additional information regarding other types of insurance available, especially if you want to avoid getting scammed by malicious insurance companies.
Here are eight types of business insurance that need explaining.
- General liability insurance / Business liability insurance — Covers expenses against general claims regarding bodily injuries and property damages connected to your operations, business premises, services, and products.
- Business owner policy — Covers general liability while providing compensation for damages and loss of your equipment and inventory.
- Business income coverage / Business interruption insurance — Helps replace lost income due to business interruptions.
- Credit risk insurance — Covers possible financial losses due to customers’ failure to pay debts.
- Employment practices liability insurance — Covers expenses against claims filed by workers regarding their legal rights.
- Key Person insurance — A life insurance policy for people considered crucial parts of the business, with the company being the beneficiary of the policy.
- Builder’s risk insurance — Covers the expenses of repairs, reconstructions, and replacement materials during the construction phase of the commercial property.
- Inland marine insurance — Covers expenses due to loss or damage to both the physical and digital business properties during transit.
And here are the ten types of business insurance that are self-explanatory.
- Commercial property insurance
- Commercial auto insurance
- Workers’ compensation insurance
- Benefits liability insurance
- Crime insurance
- Professional liability insurance
- Product liability insurance
- Cyber liability insurance
- Equipment breakdown insurance
- Data breach insurance
Do detailed background checks on your insurance company options.
Never sign a deal immediately after a conversation with the first agent you’ve come across. Make sure you have multiple options to choose from, and make sure they know that you do. This can lead to better packages. Or at the very least, it will keep the competing insurance companies on their toes.
You should also do your research regarding the reputation of each company. First impressions can be misleading. It is best to learn who you’re dealing with through the accounts of those they’ve worked with.
It can also be an advantage if you can find insurance companies that publicly have connections to other service providers that might come in handy. Having bail bondsmen in your speed dial will never hurt. Getting access to reputable corporate lawyers is also a plus.
Understand the value of coverage.
Don’t miss out on an opportunity for good insurance coverage just because of its initial cost. Always try to find the bigger picture. Saving several dollars on the premiums might mean having overly limited coverage. Remember that business or commercial insurance is there to help cover possible bigger financial losses in the long run.
Make sure you read the fine print.
Every agreement you enter needs a meticulous review. Much like everything else in the world, the business industry revolves around information. Some insurance companies might hide possibly deal-breaking information instead of saying them outright. Avoid unnecessary risks by simply reading before signing.
The bottom line
Some say starting a business is a gamble. And they are probably right. But keep in mind that the best gamblers know how to increase their chances of winning. Don’t treat business insurance as an admittance of failure but an early investment towards your success.
Meta title: Insurance: What You Need to Know Before Starting a Business
Meta desc: Knowing how you can protect your business from potential financial losses is crucial to your entrepreneurial survival. Here’s how to increase your chances of succeeding.