Running a small business can be a passion, dream and livelihood all rolled into one. With so much at stake, a small business owner has to protect their business with the right insurance coverage and find the resources to make those decisions while taking care of the company.
“When you’re a small business owner, you’re the chief operations officer, you’re the CEO — you’re everything,” says Wesley Sprinkle, SVP at CNA. “To think you have to be the insurance expert as well is just undoable for a lot of people — there’s not enough time.”
Because there is little time, or to save money, small businesses are often underinsured, leaving them vulnerable. Given the many different types of insurance and liability, it can be difficult for business owners to approach coverage in the first place.
Small business risks and liabilities
Protecting any business starts with a business owners policy. Similar to a homeowners policy, a business owners policy is broad, covering general liability and property, but can vary widely in terms of limits and coverage. Many small business owners mistakenly think their personal lines policy will cover their business risks, and forgo business insurance or purchase the cheapest policy they can find. Even if a business is insured under a business owners policy, an owner may underestimate the value of their tenant improvements and inventory just to pay less in premiums, leaving them vulnerable once again.
Within a business owners policy, one of the most important types of coverage is business interruption. If a business is down financially for whatever reason — flood, fire, electrical outage — this coverage means the difference between surviving the loss and closing the business.
“Most small business owners don’t have the financial wherewithal to sustain a loss, to revive all their equipment and inventory, while bringing in income,” Sprinkle explains. “Having the right business insurance is critical for when the unexpected happens.”
Even professionals working out of their home, such as a lawyer or consultant, need a business owners policy. As a company grows with new employees, it may need employment practices liability coverage in addition to workers’ compensation insurance. Commercial leases may also dictate certain liability insurance requirements before a business can open their doors or expand.
“As a videographer, I need insurance not only for my equipment, but also for the places where I work,” Bill Stidham, owner of Creative Video of Delaware, says. “I hadn’t thought of those types of insurance needs when I first set up my business, so I called an insurance expert for help.”
How expert advisors offer value
Small businesses often bring in experts to handle taxes and payroll, so it’s no surprise companies turn to experienced insurance experts to find adequate coverage. Licensed independent insurance agents and brokers specializing in small business offer valuable expertise.
“Independent agents offer a small business owner choice, customization, advocacy, even risk management services,” says Bob Rusbuldt, president and CEO of the Independent Insurance Agents & Brokers of America. “They are shopping all of the markets out there for the best coverages they can get for their clients.”
Resources from business insurance carriers such as CNA offer education and an opportunity to receive a quick quote for a business owners policy online — but ultimately it is impossible to replace a knowledgeable agent who champions a company’s needs.
“What you get charged for your insurance policy isn’t much compared to the peace of mind you get from having it,” Stidham added. “It’s one thing I don’t have to worry about, so when I am on the job for my client, I can just focus on my work.”