Rethinking Insurance Coverage

Like most small businesses, you probably can’t self-insure (pay for losses out of pocket) because you can’t afford the risk for substantial financial exposure. You need insurance. But you may not have the type or amount of coverage that is necessary for your protection at this time. Most small business owners routinely renew policies year after year without thinking about how changes in their business affect their risk exposure and coverage needs. Here are some areas to reexamine before you automatically renew as well as other areas for which new coverage may be needed.

Vehicle insurance

If you have a vehicle used 100% for business, such as a truck or van, likely you have a commercial policy. Just check on the extent of coverage that’s currently on the policy when you renew.

But if you use your personal vehicle for business driving (not counting commuting which is personal) and have a personal policy, rethink your coverage. The personal policy on your vehicle may not cover you if you get into an accident when driving for business. You might have to pay out of pocket for damages to your vehicle, as well as injuries—personal and property—to a third party.

If business driving is only occasional, your personal policy may be fine. But if you use the vehicle primarily for business (driving to customers, worksites, or between multiple work locations; hauling tools and equipment; making deliveries; driving by “nonlisted drivers” such as employees), get a commercial policy—even though it may cost more.

Health insurance

Do you provide coverage for your staff? Do you have coverage for yourself and your family? Here are some points to keep in mind:

  • Watch enrollment deadlines for coverage in 2018. Currently, open enrollment for individual coverage runs from November 1, 2017, through December 15, 2017 (it may be later for certain state-run plans). For those already enrolled in Medicare, the annual enrollment period to change coverage for 2018 runs from October 15, 2017, through December 7, 2017).
  • There is a new health care option for small employers (fewer than 50 full-time and full-time equivalent employees) that do not have a health plan, called a qualified small employer health reimbursement arrangement (QSEHRA). This allows a small employer to reimburse employees for their individually-obtained coverage up to a set dollar limit (in 2017 it’s $4, 950 for self-only coverage or $10, 000 for family coverage, prorated for part-year coverage). Thus, you can help employees pay for their coverage on a tax-free basis; your payments aren’t subject to payroll taxes.

Workers’ compensation

You probably know that businesses in every state are required to provide this coverage to employees (including family members), although the rules and the cost vary from state to state. (NFIB offers a state by state comparison* of workers’ compensation laws.)

What you might not know, and may want to consider, is the option to cover yourself if you’re self-employed. Sole proprietors, partners, and limited liability company members who aren’t employees are usually not covered by workers’ compensation; state law may allow them to opt in. This may make sense if you’re in a trade or other business where injuries are common.

Basic business owner’s policy

A business owner’s policy (BOP) provides coverage for your property (equipment, inventory) and liability coverage (for injuries to third parties). When your policy comes up for renewal:

  • Determine the level of coverage you require now. If you’ve added expensive machinery, for example, you may want to increase your coverage.
  • Shop around. There are many terms and conditions in each policy (such as deductibles and exclusions), and these can affect cost. Compare coverage under different policies to see whether you’re (1) getting the coverage you expect and (2) paying the best price for the coverage you need.

Depending on the nature of your work, be sure that the policy is tailored to your needs. For example, an Artisan and Service Contractors Policy covers the unique risks of tradespeople who perform their services at customer locations. Also consider adding coverage to any BOP for data breaches, which provides funds for notifying and indemnifying customers and employees who are victimized when your company is hacked.

A BOP does not cover flood damage, so depending on your location, you may need separate flood insurance. This is available through the National Flood Insurance Program.

Other coverage

The types of insurance discussed earlier aren’t the only policies you may want or need. Some other examples:

  • Business interruption insurance. This helps you pay your bills if a storm or other event closes down your facility. Depending on the policy, it may also cover some lost profits.
  • Errors and omissions coverage. This usually is for professionals (“malpractice coverage”) to provide protection against errors and negligence in the performance of services.
  • Product liability insurance. If you are a manufacturer, wholesaler, or distributor, you may want coverage in case your products cause injury to others.


Making insurance decisions may come down to cost: you may want it but can you afford it (or afford not to have it)? You can buy coverage online or through an insurance agent (a person who typically represents one company) or an insurance broker (who represents multiple insurance companies and can provide you with a formal review of your risk exposure and potential solutions). Whether you decide to work with a broker, who is paid a percentage of the premiums so it doesn’t cost you anything, depends on how much time you have to do your own legwork and how knowledgeable you are about insurance.

*Links to non-government web site

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