As your business becomes more successful, the risks of operating without proper insurance increase. Buying business insurance? Make the right choice for your company with these four tips:
- Do Your Homework The self-employed need to have their own back. Whether you’re a solopreneur with a web-based business, an independent contractor, or a freelance artist, you need to protect yourself and your assets. And as your business becomes more successful, the risks of doing business without proper insurance increase exponentially.
Begin by researching the insurance packages commonly carried by professionals in your industry. Depending on the nature of your business, you might need one or several of the following: general liability, commercial property insurance, professional liability, product liability, business interruption and worker’s compensation.
If you’re overwhelmed by the variety of plans and packages available, contact a trade organization in your area for advice. Many trade organizations and professional organizations are able to offer members reduced rates on insurance plans because they buy in bulk, so it may be worth your while to join up!
- Know Your Risks When you apply for a policy, your insurance company will measure the information contained in your application against a model of “acceptable risk” generated by an underwriter. In order to clear a profit, insurers need to do everything in their power to avoid clients whose behavior, occupation, or professional record suggests excessive risk.
An underwriter will assess your application to determine the rates and terms of your policy. Every underwritten policy carries a premium as well as a deductible. A premium is essentially the fee you pay in order to remain insured, and premiums vary widely from provider to provider.
A deductible is the amount of money you agree to pay every time you make a claim. Generally speaking, your deductible and your premium have an inverse relationship: If you agree to carry a higher deductible, then your premium payments will be significantly lower. But tread carefully: A low-premium, high-deductible policy seems like a bargain until it’s time to make a claim.
- Shop Around Insurance is the single greatest expense for many independent contractors. The cost of insurance varies for every business, but some providers specialize in insuring specific types of businesses, including independent contractors.
If you’re looking for a bargain (and who isn’t?), trade organizations and professional organizations in your area are often able to provide discounted coverage to members. By buying policies in bulk, these organizations are able to disperse the cost of coverage over a large pool of carriers.
- Find an Agent or Broker You Can Trust A commercial insurance agent can guide you to a policy that fits the needs of your business. An agent receives commissions one single insurance providers for “booking” clients—they don’t see a dime until you sign on the dotted line—so it’s important that you find an agent you can trust.
A broker, on the other hand, offers policies from a variety of companies, not just one. Brokers help you shop for the best deal in most cases.
Bottom Line: Running a business is an investment, and every investment contains a certain degree of risk. No matter what you do, you will never be able to eliminate risk from the freelance equation, but by buying the right insurance at the right price, you can moderate the financial risk associated with unexpected events. Nothing is as precious as peace of mind.