The best part of starting a business? The start. The wonderful blank page. Deciding on the name of the business and how much to charge, coming up with a logo and where to put your office. Picturing where the business will be in ten years and imagining your product flying off the shelf.
Ahem. I hate to interrupt this Xanadu but it’s time to talk about insurance.
Yes in addition to all the decisions and dreaming you’ve been doing about starting a business. You need to think about insurance.
First, it might be helpful if I dispelled a few insurance myths. Thought your homeowner’s insurance would cover your business if you operated from your home? Hoped your customers wouldn’t ask for a certificate of insurance before you do work for them? Were you pretty sure if you rented an office that the landlord’s insurance coverage would cover you too?
Here’s the straight skinny. Your homeowners insurance coverage isn’t a business policy. Depending on your business a certificate of insurance may be needed before you can begin any work (and without one, you may not get paid!). And your landlord? They will only be covering themselves and in fact they may require you cover them too.
I could go in-depth on the hows and whys of those three items but I think you’d rather know where start-ups should begin their insurance search. Start by calling a local independent insurance agent and letting them know what your business is about.
I always suggest an independent agent because they have more options and I always say “go local” because they should know your area well enough to advise on state or regional differences in coverage. If you call a 1-800 # looking for your business insurance and they are in Sioux Falls, SD but you are in Kitty Hawk, NC you could put your business at risk. A local agent may know about recent changes, like the new flood zone on that beachfront restaurant you just bought. All agents should be qualified to talk about flood but you want an insurance advisor who knows you and your business, not someone who treats all clients the same.
Once you have discussed what and where and how you are doing business, then the agent will start talking about your insurance exposures. They may ask you a lot of questions, and that’s a good thing. You would be surprised what a difference your number of employees, what kind of building you are renting, or even what kind of cooking methods you are using can make to how insurance companies determine your premiums.
The insurance agent should advise you that you need general liability regardless of what kind of business – but they will know best what format that will take. Next if you have a business that includes stock, tools, computers, and so on they will talk to you about business personal property. Additionally there may be other coverages needed like suggesting a janitorial bond for a maid service or professional liability for an accountant.
Don’t be afraid to ask your own questions so you understand what the insurance will do for you. Don’t be afraid to go on to another agent if the first one seems inexperienced in your type of business or limited in what they can offer. You are the business owner and these initial decisions on insurance are important enough not to rush through. Regardless of the size of your business you deserve great service and even greater advice.
I think the best place for a start-up to start with insurance is before you ever open have a conversation with a local independent agent. However if you’ve already opened then the only time it’s really too late is AFTER a loss occurs to think about insurance.