How To Adjust Your Small Business Insurance Coverage as You Grow
Growing your company is one of the most rewarding parts of being a small business owner. During times of business growth, it’s important to adjust your small business insurance coverage to reflect the current value of your business and its assets.
Small business insurance policies are priced based on the following factors: estimated gross sales, estimated payroll and square footage of your business location. Any significant changes to these categories can cause an increase or decrease to your premium. If you don’t actively adjust your coverage as your business grows, you could wind up facing a significant increase in the price of your premium all at once after an annual audit of your policy is completed. You will also run the risk of not having adequate coverage if you need to make a claim.
For example, if you have $200,000 worth of inventory on hand but your current policy only covers the $50,000 you had when you first started your business, you have an uninsured exposure. If an accident occurs and you lose some or all of your inventory, you will only be able to file a claim on the original $50,000 covered by your insurance. The same is true if you expand your business’s current location, move into a bigger building or purchase new equipment to be used offsite.
You’ll also want to increase your coverage if you hire additional employees or significantly increase your payroll. This will help you avoid significant unforeseen charges when your policy audits at the end of your policy term.
Additional Policies To Keep You Protected
There are several growth-related scenarios where you need to not only increase the amount of your coverage but also add policies. Here are some examples of additional coverage you may need as your small business grows:
This type of insurance will cover your employee’s wages and medical expenses if they are injured on the job. You will need to add this when you hire employees for the first time. In some states, there are significant penalties for not carrying this coverage. If you’re a sole proprietor without employees, you don’t necessarily need to have workers compensation, but having a policy on yourself can help cover your own wages and medical expenses in the event of an accident, if permitted by law.
Liquor Liability Coverage
You will need this if you decide to start selling or serving alcohol. This policy will cover any legal fees and claims expenses for an injury to or any damage caused by an intoxicated person who was consuming alcohol at or purchased from your establishment.
Commercial Auto Insurance
This policy covers vehicles that are used for business purposes. This should include your vehicle because your personal auto insurance policy may not cover accidents that occur during business use.
Professional Liability Insurance
You will want to add or increase the coverage for this policy if you start providing services that were not included in your original insurance policy. Professional liability insurance provides coverage if you or an employee make a mistake in your professional services due to negligence, misrepresentation or inaccurate advice – in addition to coverage for acts and advice that you should have provided but did not. An example of a business that needs this coverage is a computer supply store that adds programming services to their offering.
Work With Your Agent
We always recommend that you play it safe with your small business insurance and, when in doubt, call your commercial agent. Every business’s situation is different, and your agent will ask you about your products and services and use their industry knowledge to make the right coverage recommendations and avoid any uninsured exposure.
Whether you are opening a second retail location, hiring additional employees or buying a vehicle for your company, your agent will make sure you are fully protected.
To get connected with a licensed insurance agent who can help you with your growing business coverage, visit Northwest Insurance Services online today.
Insurance Products are not insured by FDIC or any Federal Government Agency; are not a deposit of, or guaranteed by the Bank or any Bank Affiliate; and may go down in value.
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