Starting a business and having a successful small business are two different things. The vast majority of businesses usually fail within their first year. Most startups never get to celebrate their fifth anniversary while a large fraction of businesses that manage to reach the 5-year mark can barely break even. If you have a profitable business that has survived the dreaded startup phase, you need to protect that business against every risk that may bring it down, including injury lawsuits. According to Smart Business Insurance, you can protect your business from lawsuits, disasters and accidents that may lead to injury to workers if you have business insurance. Business owners should take their time to shop around to ensure they find the best insurance policy on the market before they make a purchase.
What to Look for in a Policy
i) Liabilities Covered
The main reason for purchasing insurance is to protect your business from risks that may affect the enterprise. Business owners are advised to consult experts in the insurance industry to identify every possible risk that may bring down the business. A business consultant can also be consulted for this purpose. You want to purchase a policy that covers all the risks that may affect your business. This should include; injury lawsuits, workplace injuries vandalism, theft, looting, fire damage, storm damage, flooding and many others. An expert can make a list of liabilities that need to be covered in the kind of business you run.
ii) Coverage Limits
Once all the risks have been identified, the expert should also indicate how much coverage you should purchase for each of those liabilities. It is better to buy a policy that offers excessive coverage than a policy that only covers liabilities partially. To get the best value for money, however, you need to strike a balance between liability coverage and premiums. After all. The higher the coverage limit, the higher the premiums. Since you do not want to pay for coverage you may never use, it’s crucial you consult an expert to identify the most suitable liability coverage limit for each liability that has been identified.
To maintain a healthy profit margin, business costs must always be kept to a minimum. It is recommended you pay attention to the premiums charged by the insurance company for the type of liability coverage you are seeking. This is crucial as it will have an impact on your profitability. However, you need to be careful not to sacrifice liability coverage just to save on the premiums.
iv) Inclusion & Exclusion Clauses
A policy may claim to offer sufficient liability coverage, but you may discover later on that the policy is useless. The exclusion clauses may specifically state that the type of liability incurred is not covered. That’s why you have to spend time reading both the inclusion and exclusion clauses of a policy before you make purchase.
Understanding Your Insurance Policy
Just before you sign the insurance contract and pay the premiums, consider reading the whole document to understand what it covers. Be sure to check the list of liabilities covered as well as those that are not covered. Since a lot of legal and insurance jargon are normally used, you should consider asking your lawyer to explain anything you don’t understand. An independent insurance agent can also define some of the terms for you.
The exclusion clauses basically list situations under which certain liabilities cannot be covered by the policy. For instance, an exclusion clause may state that intentional damage to business property by you or your staff is not covered. This means that in case, a worker starts a fire, the damage to your business premise, plant and machinery, inventory, and other business assets will not be covered.
Another example of an exclusion clause is that liabilities arising from a fire incident are only covered up to $500,000. In case liabilities exceed this amount, the difference will be shared equally between the insurer and policyholder.
As you can see, the exclusion clauses can significantly alter the coverage of a policy. In some instances, these clauses can render the policy useless. Before you sign an insurance contract, therefore, be sure to take your time to read and understand the policy.