There are many disasters that you can insure your business against. But which insurance policies are actually necessary, and which are a waste of money? This post delves into some of the different types of insurance that you can take out – and where they rank in terms of importance.
Which policies are mandatory?
There are some insurance policies that are legally compulsory in certain circumstances. These are the policies you should prioritize the most.
For example, are you thinking of hiring employees? You’ll need to take out worker’s compensation if this is the case in order to cover your employees against any work-related injuries or sickness. This includes taking on temporary workers, although voluntary workers usually do not have to be covered.
Got a company vehicle? Commercial auto insurance could also be a legal necessity if you’re buying a vehicle to use for business. If you’re buying multiple vehicles, these will all need to be insured using fleet insurance. This guide Fleet Insurance: Everything Business Owners Need To Know explains more.
Which policies are recommended?
Some policies are not mandatory but are still worth having if you run a business. Certain disasters could be high risk and could be very expensive to recover from, making insurance worthwhile.
A good example is public liability insurance if you work around the public. This covers you against injury or property damage of members of the public (including clients, suppliers, and third parties).
Having public liability insurance in place could even be good for your reputation in certain industries – some clients may not take on a business for certain jobs unless they have this insurance policy in place so that they can be sure they will be compensated if something goes wrong.
If you own or rent a commercial building or premises, it could also be worth having commercial property insurance in place. This can compensate you if you are the victim of a burglary, fire, or natural disaster.
Although such disasters are rare, they can cost many thousands to recover from and may cripple your business without insurance. Shop around for policies so that you’re covered.
Which policies are useful to have?
Some policies can be useful to have if your budget stretches far enough.
An overlooked insurance policy that can be useful to many business owners is self-employed income protection insurance, which can allow you to recoup some of your lost earnings if you fall sick or are injured.
If you sell a product, product liability insurance could be worth having in place to protect people against potential injuries or damage to property caused by your product.
Faulty products are a big cause of claims and it may only take one hefty lawsuit to cripple your company if you’re a small business. This guide What Is Product Liability? explains more.
Equipment breakdown insurance could also be worth looking into if your business relies heavily on certain machines working. For instance, if you run a coffee bar, equipment breakdown insurance could be useful in case your coffee machine breaks, covering you for repairs and any loss of income during repairs.
Which policies should you avoid?
You can insure your business against practically any risk, but that doesn’t mean you always should. You don’t want to spend a fortune on policies for risks that are minimal and that you can otherwise pay for.
Extended warranties on equipment are often not worthwhile as you can often pay more for them in the long run than you’re ever likely to get out of them (plus many policyholders find that certain repairs aren’t covered).
You should look out for unnecessary insurance extras added to policies by some insurers. For example, you probably don’t need added flood insurance as part of your commercial property insurance policy if your premises aren’t based near a large body of water. Consider removing this extra if it affects the price and you don’t need it.
You should similarly be careful of business insurance bundles.
These are packages containing multiple different business insurance policies at a reduced rate. While you can save money on the bundles compared to taking out each policy individually, there may be policies included that you don’t need.
For example, a bundle containing workers compensation, public liability, income protection, and commercial property insurance may save you money on all four, but may not be worthwhile if you don’t have a commercial property and work from home. Instead, it could work out cheaper to take out workers compensation, public liability, and income protection separately.