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5 Questions You Should Ask about Your Small Business Insurance

5 Questions You Should Ask about Your Small Business Insurance

Starting a new business often comes with new issues, among them the need to buy business insurance. While this might be challenging for first-time entrepreneurs, small business insurance doesn’t differ much from auto and homeowners insurance policies. All require that you pay premiums to the insurance carrier in exchange for financial restitution in case of unexpected events. That said, to help you find a good small business policy, below are five important questions to ask your insurance agent.

What Type of Small Business Insurance Do You Need?

Different business structures, be it a sole proprietorship, limited companies, or partnerships, require different types of insurance policies. Since every business differs, there is no straightforward answer to this question. However, as you check the details of your venture and associated business risks, you will understand the type of insurance you need. Below are some insurance policies that can suit your business structure.

  • General liability insurance – This is the most common type of insurance taken by business owners that protect the business and business owners from property damage and bodily injuries. It also covers your business from damage caused by your employees to third parties on your premises.
  • Commercial auto insurance – You should apply for this if you have a business-specific vehicle.
  • Workers compensation insurance – This policy insures employees from workplace-related injuries. Workers’ compensation insurance is a necessity in most states, especially for businesses with employees.
  • Disability insurance – Statutory NYS disability insurance is specific to the state of New York. It also covers employees.
  • Professional liability insurance – Also called Errors and Omissions insurance or Medical Malpractice Insurance, this type of insurance covers your business if found liable for injuries or damages resulting from negligence or improper advice.

What Determines Your Insurance Costs?

Several factors affect the cost of your insurance. They include the following things.

  • Type of business – Different businesses have varying risks. For instance, if you are in the transport industry with vehicles constantly on the road, your auto insurance premiums will differ from an office-based business.
  • Previous insurance claims – Insurance firms use several factors to determine the risk levels of different businesses. If you are applying for a new insurance policy, your agent may request your previous insurance loss run. Businesses with few previous claims are categorized as low-risk.
  • The number of your employees – Sole proprietorship premiums vary from the costs of insuring a business with employees. To be specific, the rate of workers’ compensation policy is affected by the number of employees and payroll.
  • Payment plan – How you pay your insurance premiums also affects the cost. You can pay your premiums monthly or as a lump sum.

What Are the Terms and Conditions of the Insurance Policy?

Even though insurance policies differ from one company to another, you should keenly check every insurer’s terms and conditions before purchasing the policy. Insurers outline their conditions in a Product Disclosure Statement. The document highlights what isn’t covered or exclusions of the policy, optional cover or extensions, and monetary limits on what’s covered.

Exclusions include people, property, type of damage, acts, and locations that a claim cannot be made. Policies with more exclusions definitely cover only a few risks. However, typical exclusions include damage or loss due to war or terrorism and events occurring outside the insurer’s limits.

Unlike exclusions, extensions outline events that fall outside normal conditions stated in the policy but can be included at an additional cost. Lastly, limits are the maximum amount the insurer can pay following an event covered in the policy. You should understand all these before signing an insurance contract.

How Can You Lower or Save on Insurance Premiums?

Unknown to many, you can save money on insurance premiums in many ways. Depending on the insurance company, you can save money by bundling several policies together or ensuring a safe working environment by managing inherent risks in your small business. Some insurers also offer discounts to employees and other forms of discounts depending on your business size.

How Do You Submit an Insurance Claim?

You should also inquire about the process of submitting an insurance claim in case of an event. Most insurance companies are strict with this, and you should follow due process to get compensated. That said, your insurance agent will guide you on who to contact immediately after an incident occurs. In most cases, you should contact the claims department of the company to file your claim. The company will send its assessors to investigate the claim. In case of serious damages, the company sends their preferred restoration company or recommends their preferred options.


Purchasing an insurance cover for your small business is a crucial investment that protects your business from unexpected eventualities. As you explore several options, ensure that you ask your insurance agent the above important questions.

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by Brian Perry // Brian Perry is a contributor to Businessing Magazine.

Opinions expressed by contributors are their own.