3 Factors That Influence Your Business Insurance Coverage Needs

While it's recommended that you consult your business insurance broker when looking into obtaining and maintaining the proper type of business insurance coverage, it's also a good idea to educate yourself somewhat on the topic. It's not only important to have the proper types of business insurance but to also maintain the correct amounts.

As your business changes, coverage amounts may also need to change, so it's a good idea to revisit your coverage every year or two. Having too little insurance could leave you in the lurch if you were to suffer a major loss without adequate coverage. Having too much coverage for your specific needs is a waste of premium dollars.

Factors that Influence Your Business Insurance Needs

With the numerous financial risks confronting every business, it's important when deciding on your exact business coverage package to consider the different variables. Here are some of the factors that should guide your decisions:

1. Risk levels – different types of businesses have different risk levels. If your company makes child car seats, potential liability claims are much higher than if you're running a travel agency. Your level of liability coverage should be greater. If you have a sole proprietorship and someone sues you, you stand to lose a lot more personally than if your company is incorporated because then only the business assets are at risk of being seized. As a sole proprietor you could be totally responsible for paying any judgments.
2. Legal requirements – certain states may require that you carry specific types of insurance and at certain minimum levels, depending on your business type. In addition, your landlord or mortgage lender may require minimum levels of property insurance. In North Carolina, businesses with three or more employees are required by law to carry Workman's Compensation insurance (or qualify to become self-insured). Any company vehicles will also be required to be covered by a commercial auto insurance policy.
3. Business valuation – the value of your business is also a major factor in determining your insurance needs, whether value is figured on the amount you've invested, the amount you could expect if you sold the business or what it would cost to replace everything in your business should it be totally destroyed by fire or hurricane.

Keep these factors in mind when purchasing or updating your coverage. Make sure to have your broker explain every detail and explore all contingencies.