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In business, as in life, two things are certain: taxes and, well, uncertainty.
The COVID-19 pandemic is a classic example of how uncertainty can topple your business. Prior to 2020, you wouldn’t have, even in your wildest imaginations, thought that a virus can keep businesses shut for several months.
While you cannot eliminate uncertainties, there are steps you can take to better prepare for them. Buying business insurance is one such step.
If you’ve been considering taking this step, one of the questions in your mind is: how much insurance does my business need?
In this article, we’re answering this question. Continue reading
How Much Insurance Does My Business Need?
Right off the bat, you need to know that there’s no fixed business insurance amount. Every business has its own unique insurance needs. As such, an amount that’s right for your small business isn’t necessarily the right amount for my small business.
That being said, there’s a blanket policy most businesses buy. It’s known as general liability insurance. This policy protects your business from a range of liabilities it might face in the course of its operations.
The average general liability policy provides coverage for up to $1 million, at a cost of about $500 annually. This is to say, if your business faces a million-dollar lawsuit and is compelled to pay out the amount, your general liability insurance provider will settle the claim.
What Affects How Much Insurance Your Business Needs?
There are a number of variables that affect the amount of insurance a business need. Here are two that carry the most weight:
The Nature of Your Business
The risks (and the type and level of those risks) a business faces vary from industry to industry.
For instance, a fast-food restaurant and an online shoe store face, for the most part, different risks. While a restaurant has an increased risk of fire, the online store doesn’t really have to worry about fires as much. On the other hand, the online business faces an increased risk of cyberattacks while the restaurant faces no such risk, assuming it doesn’t have any online operations.
The good news is there are insurance policies catered to most types of businesses. If you run a logging company, look into lumber insurance. If you’re a restaurant owner, check out restaurant insurance.
The Size of Your Business
The bigger the size of your business, the more insurance you’ll typically need.
If your business has multiple outlets across your state or the country, you cannot expect to require the same amount of insurance as a startup with only one location.
If you have several employees, your insurance needs will increase, especially with regard to workers’ compensation insurance.
Purchase Adequate Business Insurance
To this end, you certainly have a clearer answer to the question: How much insurance does my business need? But to recap, there’s no fixed amount. It all depends on the nature and size of your business, as well as the types of risks your enterprise faces.
If you’re still unsure, seek the advice of a small business consultant.
Stay hooked to our blog for more small business tips and insights.