Business Owners Policy: Insurance Myths & Tips

Setting up a business can be a very exciting time for anyone. The sense of achievement and success you get in running your own company is hard to beat. One question that that is asked very often by business owners both old and new is “Do I need business insurance?” The answer to this question is simple. Yes you do. This raises another crucial question that needs to be addressed. It is “What business insurance do I need?” There are many different types of insurance available to the business owner. Five types of insurance that all businesses should definitely consider:

  1. Property Insurance
  2. Liability Insurance
  3. Health and Supplement Insurance
  4. Business Vehicle Insurance
  5. Workers Compensation Insurance

There is an option available to business owners to get a customized insurance package that includes all the necessary insurance for their business. This comes under the name of Business Owners Policy Insurance. This is advantageous to business owners looking to cut costs as the price is usually lower than if the individual policies were bought separately. 

A lot of business owners are put off buying business insurance for many reasons. A lot of these center around myths about business insurance. We have organized five myths about business insurance that are regularly asked by business owners.

Myth 1: My business is a corporation. The corporate format protects me from liability, so I don’t need insurance.

This myth is completely false. Being a corporation only protects the individual investors, the owners, and the officers from personal liability for the actions and debts of the corporation for corporate purposes. There are laws that allow the ‘corporate veil of protection’ to be removed under certain circumstances. If this happens, the owner could be personally liable and must answer a court judgment with personal assets, such as their house, car or even their life savings. When this can happen varies from state to state. A simple way to look at this is the smaller you are the more likely this can be.

Myth 2: Nobody will sue me, my business does not make a lot of money, and “you can’t squeeze blood from a turnip.” My business is not collectible.

Again this myth is false. Anyone and any business can be sued at any time. Once a money judgment is rendered against them by a court of law, it must be paid out. Judgments do not go away. It certain situations judgments can be renewed. Everybody is collectible at the hands of a persistent attorney.

Myth 3: If I die or become disabled, my family and my business partners are friends and they’ll just work it out.

The plain and simple fact is that a lot of small businesses rarely survive the death or disability of one of the main members. Most businesses do not have the cash flow necessary to pay the estate of a deceased member for its interest in the business. It is also rare that family members and business partners rarely work things out or come to an agreement after the death or disability of a member.

Myth 4: The use of my car for business purposes is covered under my existing auto insurance.

Unfortunately this is, again, false. If you use your personal car for business use your current auto insurance policy my not cover you. You may need to extend the policy to include business use to it. It’s a good idea to check your current policy to see what kind of business use is covered. If your employees use your car for business use, you may need to get a separate insurance policy to cover them.

Myth 5: An expensive business owner’s policy is your only option for complete coverage for your home-based business.

This is one myth that many people fall for. This is also a reason why people tend to stay away from a business owner’s policies. In fact getting a business owner’s policy is often cheaper than getting all the insurance you need separately.

Tips On How To Get Cheaper Business Insurance

The following are just a few ways in which you can reduce your business insurance premiums.

  1. Shop Around:  Do some research on what different companies offer and how much they charge. You’ll be surprised at the differences between companies.

  2. Buy A Package Policy: As explained above, a package policy can cost significantly less than if you were to purchase each insurance type separately.

  3. Work With Your Agent: If the agent knows a lot about your business they will have a better understanding of your insurance needs. As a result they will be able to get you the correct insurance for your needs that is the most cost effective for your business.

  4. Deductibles: Like all other insurance the higher the deductible that you choose the lower your premium will be.

  5. Employ specific loss prevention actions: These actions could include installing alarms and sprinklers, having an emergency action plan, written safety plans and loss control training.

At Sutherland-Scherff, we believe that you should not over pay for your business insurance. We understand that young businesses need to be supported every step of the way. That is why we believe in affordable and customized business insurance policies. We take the position that ‘one size insurance policies’ do not fit all. Every business is unique and requires careful planning and understanding.

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