How Much Insurance Do You Need for Your Business?

When business owners look to purchase business insurance, they often ask, “how much insurance do I need?” When people ask this question, they’re typically looking for answers to three different questions, including:

  • What types of insurance do I need?
  • What should my insurance coverage limits be?
  • How much does insurance cost?

This guide will provide clarifications for all of these questions so you can better understand what to expect when purchasing business insurance.

Understand What Insurance You Need

The first step in figuring out how much insurance your business needs is understanding what coverage you’re legally required to have. For example, workers compensation, unemployment, and disability insurance have legal requirements that vary by state. Make sure to check which laws apply to your area so you know your obligations.

Other types of insurance may be relevant to specific operations. For instance, liquor liability insurance is a must-have for businesses that sell or serve alcohol. Some businesses may need commercial auto coverage. Your Society Insurance agent can help identify your business’s unique risks and create a plan that’s tailored for you.

Here are some additional types of business insurance to consider:

  • General Liability Insurance is recommended for all businesses and provides coverage for claims involving injuries or property damage. One of the most common types of insurance claims is those for slips, trips, and falls. General liability insurance helps protect your business and customers and can cover medical expenses if an injury occurs on your premises. 
  • Fire Insurance protects against losses or damages caused by fires. This coverage is particularly important for businesses like restaurants that have higher risks for fires.
  • Business Income Interruption Insurance offers reimbursements for businesses forced to close due to covered causes of loss. For example, if your business suffers a fire and cannot operate as expected, business income interruption insurance can reimburse you for the loss of income.
  • Cyber Liability Insurance protects against data breaches and other cyber attacks. This coverage is especially important for small businesses as they’re often the victims of cyber attacks and may not be able to mitigate the costs of an attack as well as larger companies.
  • Umbrella Insurance provides additional coverage beyond the limits of other insurance plans. Some banks and property managers may require you to have umbrella insurance to protect their assets and properties, so make sure to verify if it’s a requirement for your business.

For more information about the types of insurance you shouldn’t go without, read our comprehensive post on the topic.

Know What Coverage Limits Your Business Needs

Most insurance policies come with two coverage limits: an aggregate limit and a per-occurrence limit. The aggregate limit is the maximum amount your insurer will pay out for all claims during the policy period. The per-occurrence limit is the maximum amount your insurer will pay for individual claims.

If you rent your business’ property location(s), your bank or property managers may set minimum coverage limits for certain insurance plans (like general liability insurance) that you’re expected to meet. They typically do this so they are assured that their property assets are being protected to an acceptable degree. Make sure you’re aware of any coverage limits you’re expected to meet before purchasing insurance.

Factors That Affect the Cost of Business Insurance

The cost of business insurance varies. Here are some factors that may affect your monthly premiums:

  • Your Business’s Industry: Each industry and workplace has different risks that come with the job, and those risks affect how much your insurance costs. Businesses deemed high-risk will have higher insurance premiums than those at a lower risk. For example, a construction firm is a much higher risk than a bookstore because of the kind of work performed. 
  • Number of Employees: Businesses with fewer employees can typically expect to pay less for insurance than those with a large number of employees. The potential for claims increases with more employees that could suffer an injury at work.
  • Location: Certain areas are more likely to experience severe weather and natural disasters, which can increase the price you pay for property insurance.
  • Your Coverage Limits: As we discussed in the previous section, you may be required to have coverage limits that meet or exceed a minimum amount set by a bank or property management company. A higher coverage limit generally correlates with having a higher monthly premium.
  • Your Insurance History: Businesses that have never filed an insurance claim or suffered heavy losses will likely pay less than businesses that have filed for many losses.

Protect Your Business With Society Insurance

Ultimately, meeting with a Society agent is the best way to get more definitive answers to all of these questions and more. Our agents will work with you to understand your business’s unique needs to create a plan that gives you peace of mind knowing your valuable assets are protected.

Contact your local Society agent today to get started.

Author

As a mutual insurance company, we operate and exist for the benefit of our policyholders. For more than 100 years, Society has been helping businesses overcome the unexpected with comprehensive coverage packages and outstanding claims handling, underwriting and risk management.

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