7 reasons to reassess your small business insurance
Presented by State Farm
There’s never a bad time to consider how well-protected you and your small business are, particularly when it comes to insurance. Insurance for small business helps mitigate losses and provide financial stability, which, in turn, gives your clients and customers confidence. Even if you think you’re already set, your coverage needs can change as quickly as your business does, so reassessing regularly is wise.
“Businesses are having to adapt at a faster rate than ever before,” says Jen Wilkes, an agent with State Farm and a small business owner herself. “Whether the need for adaptation results from technological changes, government regulations, marketing avenues, or other changes, making sure you are prepared to adapt and adjust is key.”
The type and amount of insurance to carry for your small business is directly related to its value and risk factors. For example, the level of insurance a computer consultant who runs their business from a home office needs, compared to a brick and mortar computer retail store with 20 employees, may be different. Some insurance is mandated, while other types are optional but designed to protect the business from various types of losses.
As companies grow and evolve, their insurance needs can change. It’s a good idea to stop and reassess your business’s insurance needs after certain events — here are seven that are particularly notable.
1. Ownership change
If you decide to bring on a partner, hand partial ownership to the next generation, invest in a high-powered salesperson, or even sell your company, it’s a good idea to take a look at your key person insurance. Key employee insurance helps ensure the business can continue to operate if an important member of your leadership team dies. Any change in your core management team should spur you to evaluate your insurance coverage.
2. Legal entity update
Many small businesses reach a point where it makes sense to establish an LLC, subchapter-S corporation, or partnership, especially if the company was originally structured as a sole proprietorship. As you evaluate which formal legal structure makes sense for your business and the number of owners, take a look at your insurance coverage, too.
3. Big growth
When things are going well and you’re winning new clients, adding satellite offices, or bringing on new product lines, you’re probably less likely to be worried about suffering a loss. And that’s exactly the right time to reassess your small business insurance coverage. As the value of your business increases, you’ll want to be sure your company is protected from major loss. The more your business grows, the more protection you need — a fact State Farm agents, as small business owners themselves, know firsthand.
4. Employee expansion
Adding staff means growth, which is good news, and it can require you to update your workers’ comp policy. Take the opportunity to look at other coverage your employees may need, such as health insurance, if you offer it, or key employee insurance, if you’re hiring a new member of your executive team.
5. You move your operations
At some point, you may decide it makes sense to own the building you’re operating out of, rather than continuing to pay rent. In that case, you’ll want building property insurance on top of liability coverage. But even if leasing continues to be the best choice for your business, make sure you have enough business personal property insurance to cover the value of all your equipment if anything were to happen, such as a break-in or a sprinkler malfunction.
6. Vehicles become an asset
Whether you decide it’s time to buy or lease a vehicle, make sure you have commercial auto coverage in place. Not only does that help protect the business from liability if an employee gets into an accident, but coverage can also be purchased to help cover the cost of repairs to the car, truck, or van that may be critical to your operations.
7. New client contracts
Before signing on the dotted line of a big new contract, make sure any insurance requirements are being met. Some contracts include specific levels of coverage that you’ll want to be sure are in force.
Small business insurance from State Farm works in the background of your company, steadfastly supporting you through the ups and downs. Wilkes explains, “By having certain protections and stop gaps in place, you can ensure business continuity even in times of crisis.” A solid policy, re-evaluated regularly, is there for you when you need it most.
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