Starting a business is like planning a wedding. At every turn, there are new decisions to make about things you were neutral on just days before.
What’s your company’s name? What kind of business are you founding? Should you do your own bookkeeping or farm it out?
And that’s not even getting to more basic things like the look of your office. Do you want popcorn ceilings? How about exposed brick?
One of the most important decisions you’ll make for your business is the various insurance plans required for operation. It can get more complicated than choosing your own health insurance plan. You’ll need insurance for your employees as well as several aspects of your operations.
There are nearly as many insurance options as there are textures of ceiling. We can help you wade through them in this handy guide to the types of insurance and when you need them.
Let us do the heavy lifting for you when it comes to informing yourself on how to choose an insurance plan.
The Basics: What Are the Types of Insurance Every Business Requires?
If you’re starting a business with more employees than just you, there are several types of insurance you can’t get around having.
The federal government requires you have all of the following types of insurance, even if you own a very small business.
Workers’ Compensation Insurance
You don’t plan for them, but accidents happen in every kind of workplace. Workers’ compensation insurance protects your peace of mind as a business owner. You’ll be taking care of your employees with minimal risk to yourself and your livelihood.
Employees injured during their employment with you can rely on workers’ compensation to provide them medical benefits and wage replacement. In exchange, they relinquish their rights to sue you for negligence.
Just like you’d prefer to avoid on-the-job accidents, we’re sure you want to retain all of your employees. You don’t spend the time and money you do on hiring and training if you want to flush that all away.
That said, layoffs are a fact of life. With unemployment insurance, you can partner with the government to compensate laid-off employees.
Unemployed workers can take advantage of unemployment, as long as they’re not responsible for their release from work. They get cash benefits that come from a partnership between the federal and state governments.
Like many of these insurance policies, unemployment insurance gives you the confidence of having taken good care of your employees and not just your own bottom line.
Disability is another unfortunate reality that sidelines some workers. By purchasing and maintaining your disability insurance plan, you can look out for the health of your employees and help them get back to work for you as quickly as they are able.
How to Choose an Insurance Plan That’s Right for Your Business: Types of Insurance Available
Once you get past the requirements, the options for insurance really spread out before your eyes. Before you get blinded, let us help you examine each type of insurance to tell if it’s right for the type of business you have and your needs as a company.
General Liability Insurance
The benefits of general liability insurance share many commonalities with disability, workers’ compensation, and unemployment insurance.
In addition to those things, general liability policies protect a business against financial losses that can come from property damage, libel, slander, any defending of itself a business needs to do in court, and settling bonds or judgments.
It’s a type of broad umbrella policy that most businesses can benefit from.
Product Liability Insurance
These types of plans are particularly useful to businesses that supply a physical product to the public. Any company that manufactures, wholesales, distributes, or retails an item will benefit from product liability insurance.
But what exactly is this type of insurance? It covers a business against financial losses that come from defective products.
If a product a company makes causes injury or bodily harm, a business can get in real trouble. Product recalls may only help so much. Product liability insurance offers a business owner the peace of mind that comes with knowing they’ll be covered in case they’re sued for a dysfunctional product.
Professional Liability Insurance
These plans are similar to product liability policies, except they cover services rather than products. This is also known as errors and omissions insurance.
Policies provide businesses with defense and protect against damages that come from failing to or improperly providing professional services. General liability insurance does not cover this.
The types of businesses that can benefit from professional liability insurance include law firms, barber shops, accountants, consultants, and real estate agents.
Commercial Property Insurance
Most businesses exist in the physical world. This means they need physical properties for offices and operations. These offices usually have equipment that pertains to the work the business is doing.
Commercial property insurance protects this equipment. If company property is damaged due to natural weather events such as hail, wind, fire, or smoke, commercial property insurance is a helpful thing to have.
Home-Based Business Insurance
This is a specialized type of insurance that’s most helpful to businesses run out of their owners’ homes. It’s a subset of homeowner’s insurance that can cover some equipment within the home office and some liability for third-party injuries.
Business Owner’s Policy
Home-based business owners also find a BOP especially helpful. This is a package of insurance that includes all the coverage a company needs rolled into one: liability insurance, property insurance, and more.
A good business owner’s policy can save you quite a bit of time and money compared to shopping for and buying all of these plans separately.
This is where we start getting to the good stuff. Future employees will be looking at this type of insurance closely when they evaluate whether or not they want to work for your company.
Life insurance provides peace of mind to your employees. They know their families will be taken care of in the event of their death while working for you.
Many employers don’t offer this kind of insurance. Offering it at all can make you stand out from the pack during a prospective employee’s application process.
LifeNet Insurance Solutions is one resource. Get more info on life insurance options.
We’ve saved the mother of all types of insurance for last. Every employer worth their salt offers health insurance to full-time employees. It’s one of, if not the most important part of a benefits package.
There are several types of health insurance plans to sort through. The major types are as follows:
- Preferred Provider Organization (PPO) plans are among the more expensive options, but they offer policyholders more freedom in choosing their care.
- Health Maintenance Organization (HMO) plans are fairly restrictive in their options but run on the more economical end of the spectrum.
- Exclusive Provider Organization (EPO) plans split the difference between HMOs and PPOs in cost and freedom of provider choice.
- Point-of-Service (POS) plans combine the benefits of HMOs and PPOs into plans that involve choosing a primary doctor but include options for coverage out-of-network.
- Catastrophic Plans are low-premium plans designed to cover only the most catastrophic medical events, hence the name.
- High-Deductible Health Plans (HDHP) are also typically low-cost to you because they require policyholders to spend a fair amount out-of-pocket before they reach their deductibles. Technically, these plans can also fall under the PPO, HMO, EPO, or POS umbrellas as well. You may offer a Health Savings Account (HSA) to help your employees deduct the cost of their healthcare from their taxes.
Deciding on exactly which type of plan to offer your employees requires their input. What are the things they value in their health insurance? Do they prefer greater freedom or lower cost?
No matter which plan you choose, you’ll want to make sure your employees know about it ahead of time so they can plan to opt in or out. They’ll also get to know in advance how much you’ll be deducting from their paychecks each pay period.
Moving Forward: Weigh Your Options and Choose Wisely
The nature of your business will determine the types of insurance you need. Hopefully, our advice on how to choose an insurance plan helps you clarify your priorities and understand the insurance marketplace. A qualified and experienced agent can be quite useful as well.
Once you’ve got your insurance plan approach in place, check out our ideas on marketing your small business. That way, you can grow to a point where you can offer even better employee benefits.