How does a business insurance policy work? An insurance for companies works in principle in the same way as an insurance for private individuals.
As a business owner, you need protection if something should happen, just as you as a private person need insurance that protects your home and yourself. Business insurance is security when unforeseen events occur and you need financial support. Regardless of the type of business you run, a business insurance policy is important to have, and it should be tailored to the specific needs of the company.
It is recommended that both limited companies and individual companies have company insurance. In a limited company, it is possible to save capital in another way so that you can buy new equipment or make new investments more quickly if something should happen that requires it, but it is still an unnecessary expense that in many cases could be covered by insurance. As far as individual companies are concerned, they often have a smaller capital, which means that you as an entrepreneur will be hit hard financially if, for example, you lose the company's equipment in a fire and do not have insurance that covers the losses.
How does a business insurance policy work?
Insurance for companies works in principle in the same way as insurance for private individuals. As an entrepreneur, you insure yourself, potential employees and the company against a number of different events. You can often decide for yourself what should be included in the insurance, which means that it can be adapted to the business, assets and facilities. Since business insurance, just like any other insurance, needs to be tailored, it is a good idea to take the time to map out the insurance needs and compare business insurance with each other before choosing which one to take out.
Ordinary business insurance
There are a lot of different types of business insurance that cover different parts of the business. Here are some of the most common types of insurance.
Property insurance for companies is a protection that will help cover costs that arise as a result of unexpected events. This could be, for example, thefts, burglaries, fires or floods that have destroyed equipment, tools or other property belonging to the company. If you want to take out property insurance, you need to compare the terms between different insurance companies so that you know what kind of property is covered by the protection and check what types of events are considered unforeseen and which entitle your company to financial compensation.
If you have a producing business, this is good insurance. Perhaps the business is dependent on a number of machines for the company to be able to continue, and if for some reason they become stagnant so that it affects production, the company suffers an interruption in the business which can be costly. Interruption insurance for companies sometimes, in addition to compensation for the direct damage, also provides compensation for the loss of income that the company suffered as a result of the event. The insurance can in some cases also cover for such interruptions that are easier to handle, such as that you spill coffee over the computer or that the hairdressing scissors break and prevent you from working as planned.
If due to the company's activities in any way, damage occurs to someone else's property, or if a personal injury occurs to a third party, liability insurance may cover the number of damages that the company is forced to pay. For liability insurance to apply, there must be no intent to what has happened, in other words, it must be an accident. The incident must not have occurred as a result of serious negligence, but if you as a company have taken all possible precautionary measures and the accident still occurs, liability insurance for companies will help you to compensate those who have been affected.
Legal protection insurance
Sometimes disputes arise. For a company, it can be about disputes with suppliers, customers or with another party. In the event of a dispute, you need expert help from lawyers who are familiar with the legislation and who can either mediate or be involved during a legal process. Legal expenses insurance is available so that entrepreneurs get the help they need in any litigation without having to pay the lawyers 'or lawyers' fees out of their own pocket. The insurance thus becomes the protection for you as a business owner so that you have the security that you can pursue a dispute further, for example, if a customer does not pay your invoices, without risking having to bear expensive additional costs.
Sickness and accident insurance
If you are self-employed, this is very important insurance. As a self-employed person, you are not covered in the same way by the classic insurance cover as an employee does. If you become ill and it affects your ability to work, both you and the company can suffer financially if you do not have insurance. Accident insurance also covers any sudden medical expenses that arise if you are involved in an accident at work.
Tailor a business insurance
As far as corporate insurance is concerned, most insurance companies have different packages that cover the insurances we have reviewed above. You can also choose to add or remove parts from the insurance packages if you consider them necessary or not relevant to the business you conduct, but in general, it is usually said that the various insurances exist for a reason. Having good insurance is important for you as a business owner, but you also need to compare business insurance with each other, map out what needs there are in the business and then choose where you want to take out insurance. Do not just stare blindly at the price but be sure to read the terms and conditions to get the protection the company needs.
A risk analysis will help you choose corporate insurance
Before you take out business insurance, it is a good idea to do a risk analysis. You can either do it yourself or with your employees. One model that can be used to perform a risk analysis is the two-field model. It means that you first brainstorm about various accidents and events that could occur in the company. When you have a list of different events, you then make a probability assessment where you estimate how likely it is that something like this would occur on a scale from 1-5. The next step is that you price the risks by rating how financially harmful it will be if you happen to the events. Here, too, you use the scale 1–5 and then take the numbers you have arrived at and multiply them by the number you entered for how likely it is that this particular event will occur.
For example, an earthquake is less likely to occur, and such an event is therefore likely to have one. However, should an earthquake occur, the cost of repairing the damage will be high, ie one in five. The probability multiplied by the cost of this event is therefore five.
The higher the number you get when you use this model, the more you need to consider whether you should insure yourself against the risk. There are no clear guidelines for which number to arrive at for insurance to be necessary, but if the number is around or above eight, it is good to consider business insurance that contains protection for the event.
Costs associated with business insurance
Of course, the price is important when you take out business insurance, but the price tag is not the only thing you should look at. If something should happen, you will probably have to pay a deductible, and how large that amount differs between different insurance companies and different business insurances. In some cases, you can even lower the deductibles by purchasing additional services for this. So you should not only look at what the monthly cost is for business insurance but also look at how you will be affected if the accident should occur and you need to bear the deductible.
Always negotiate the price of a business insurance
Insurance companies tend to appreciate loyal customers who do not quarrel too much. If you have a business that needs several types of insurance coverage or if you have a sole proprietorship and also want private insurance, it is often possible to negotiate the price together with an administrator at the insurance company. If you can also show that the company has a spotless background and has not previously had to use the insurance cover, you have an even better starting point for reducing the price of the insurance.
In order for you to be able to negotiate the price, you need to contact the insurance company so that you can talk to one of their employees and explain your needs and conditions. It is also possible to take out insurance directly on the internet, but this means that you cannot request a lower price afterwards. Instead, you can take advantage of discounts and offers that are only given online.
Read the fine print
As with any contract, you need to read the fine print before putting your signature on the paper. Read all terms and conditions several times so that you know for sure what the agreement means for you, what protection you receive and also what kind of events are not covered by the insurance. If you represent a larger company and you need corporate insurance, it can be a good idea to have a lawyer look at the paperwork, as it is often a question of large sums of insurance and complicated terms if something should happen.
One thing that is important to keep in mind is that in the vast majority of insurance terms and conditions, it appears that the company must have taken all necessary measures to reduce the risk of damage. If you, as a private person, for example, get rid of your bicycle because you put it outside the store without having locked it, you rarely receive any compensation for the bicycle, and the same applies to company insurance. If you have a business that has large amounts of theft-prone equipment, you can expect to pay a higher premium for corporate insurance, but you can also install alarms, sign agreements with a security company and have real security doors and locking systems that show that you act responsibly. This, in turn, can reduce the premium for corporate insurance.
Network organizations can lower the price
There are many different industry and business organizations in the USA. If your company is one of them, you can check if the organization has an agreement with an insurance company. It is common to conclude such agreements and they tend to give member companies a better price on corporate insurance.
Discuss insurance with other business owners
Last but not least - take advantage of your contacts in the industry! They may be based on knowledge about corporate insurance and insurance companies that you do not have and can provide tips and advice on where to turn and which companies provide the best insurance. By talking to others, you can be sure to find not only the cheapest business insurance but also the one that is the very best.
Questions and answers about corporate insurance
Is it possible to reduce the price of business insurance?
Yes, among other things by taking various measures that show the insurance company that you have done what you can to reduce the risks of something happening. If you have injury-free years, you can also show the insurance company documentation of this so that they perceive the company as serious.
Can I insure company cars through the company?
Many insurance companies offer car insurance to companies. A requirement for you to be able to insure cars through the company is that they are written on the company and not on you as a private person.