Small business basics: what kind of business insurance do I need?
Starting and running your own small business can be exhilarating. And terrifying. After all… from the moment you start, you face plenty of risks. Most likely your overall business strategy includes risk management to help you make sure that you avoid things like unnecessary debt, or to ensure that you have enough cash flow reserves and able to successfully manage your overheads.
Part of your risk management strategy should include business insurance. But how do you know what kind of insurance your small business needs? How can you make sure that you don’t over or under-insure?
Here are a few key points to help you begin the process of assessing what kind of cover your business needs.
Where to start
The easiest place to start when you’re in the process of identifying and quantifying your business’ potential risks is the physical. Basically, it’s whatever assets your business has that could suffer from damage or loss, from the buildings and stock to the equipment and vehicles.
This would show you if (or how much) cover you need against risks like fire, theft, water damage, as well as cover for your business’ cars and any business interruption.
Check your industry weak spots
What you can then do is examine the industry your business fits into. By looking at all the obvious activities and assets associated with similar businesses within your industry you should immediately identify the obvious points of vulnerability. For instance, is your business more at risk of stock theft or being sued for malpractice?
The vulnerable details
Then it’s time to get specific and examine the details.
While many of the risks associated with your industry could be true for your business, there are more than likely several less obvious risks where only your business could be vulnerable.
To do this, just break down your company risk profile into 2 columns: business assets and business operations and filling in your assets and areas of risk accordingly. Dividing up your risk in this way will bring to your attention the less obvious places where your business needs to be covered.
It’s easy to identify the physical areas where your business is vulnerable. But it gets harder to quantify the general ways your business is open to liability. The simplest way to do this is to think of your liability as existing in 3 basic areas. The first is if something happens to your employees. The second is if something happens to visitors on your premises. The last is if something happens to your customers because they’ve used your products or services. It’s important to think about these 3 areas and discuss them with your insurer. At King Price, we take particular care to caution you against underinsuring when it comes to public liability, for instance.
Then go specific
What if your liability isn’t so general? What if your business opens you to very specific liability, the kind whose work could lead to lawsuits for damages? Well, for those businesses, like financial agencies and medical practices, professional liability cover is what you would need to ensure is included in your business insurance product.
If you’re still unsure about how best to manage your business’ risk, then chat to us. We’ve put our royal spin on business insurance to help you make sure that your business has the cover it needs.
Let’s get down to business.