Putting up a business is not as simple as investing money, signing lease contracts, hiring employees, and starting operations. It involves a lot of intricate details and, more often than not, requires you to risk a huge amount of money.
You never know if your business will take off the way you want to or if it will fail. But what’s certain is that you want to prevent as much financial loss as possible. This is why it’s important to also set aside funds to get your business insured.
But how do you effectively budget for this? Knowing how much coverage you need is the first step, then comes these practical tips that can help you set up that budget.
What Kind of Business Coverage do you Need?
If you are going to invest in business insurance anyway, make sure you get a policy with the most comprehensive policy. If you already have an insurance plan in mind like what the Leading insurance brokers in Perth have, check that it offers coverage not only for your property but also for business interruption, workers’ compensation, liability insurance, and commercial automobiles (if you have them).
A policy that has coverage for all these is more cost-effective and keeps your business out of trouble while also ensuring you take care of your staff amid a halt temporary halt in your operations.
Property and Business Interruption insurance protects buildings and all contents within such as equipment, furnishings, and inventory. Most business owners avail of this policy, but it doesn’t always mean it’s the most practical. If your office space or place of business does not have much to it that would cost you money to replace or interrupt your operations, you can choose to forgo this to avoid being over insured.
Workers’ Compensation covers your employees’ medical expenses and missed wages if they are unable to report to work for some reason, while General Liability Insurance is meant for legal fees that are usually needed when you are facing a lawsuit.
For insurance on Commercial Automobiles, you are getting coverage for the vehicles used in your business, especially if they are crucial to your daily operations. If the vehicles are rarely used, it might not be the best idea to get this type of insurance because your typical auto insurance could be enough.
When should you avail of Business Insurance?
One reason why business owners put off getting business insurance is because they are under the impression that it’s expensive. In some cases, entrepreneurs decide to get one only when the business starts making a profit. While this is perfectly fine, it might help business owners to shoulder expenses easier if they set aside funds for it earlier.
Ideally, the best time to sign up for a policy is right when you begin operations. But if this is a bit too much or if you want to delay it until your business feels a bit more stable, you can prioritize depending on what you think is most needed in your day-to-day operations.
How Much should you Spend on Business Insurance?
According to insurance experts, the general rule when budgeting for business insurance is to calculate around 20 to 30 percent of your predicted gross sales as the baseline for the budget. This is enough to include health and life insurance coverage, but keep in mind that it also depends on which industry your business is in.
This amount could be a little low if you are involved in high-risk industries such as construction and manufacturing and may be too high for businesses deemed to be low-risk such as home-based businesses.
But if you can set aside at least this much from your earnings, it wouldn’t hurt to use it for business insurance. After all, you are also benefiting from it in the long run. Nothing is better than having peace of mind knowing your business and employees are protected.
What are the Things you should Keep in Mind before Getting Insurance?
Business insurance is a form of investment, which is why it still pays to be careful before entrusting your hard-earned money to an agent or the bank. So before you sign up for that policy you’re thinking of getting, make sure you fully understand what you’re getting yourself into.
Acquiring business insurance is fairly easy to do but can be tricky, especially for small-business owners because they normally do not have risk managers to do this job. But the first thing you should do is to find a trustworthy insurance agent.
If you have to speak with as many as you can, do so. Or ask fellow entrepreneurs who have business insurance if there is someone they can recommend. This lessens the chance of you making mistakes in the business insurance process, which could be a costly thing in the end.
Another thing to keep in mind would be to come prepared when you meet your insurance agent. Know what questions to ask, so you can gauge their knowledge and competence when it comes to commercial insurance. Do your own research online to be familiar with the various types of coverage you can avail of.
Remember that it is always better to be prepared. If you have the means to purchase an insurance policy, better do it to avoid bigger financial and operational losses in the future.