Business Insurance 101 – Starting a new business

You have started your own business – now what do you do?

Two people working at table with an open laptop and writing on papersOnce you decide to start operations the last thing on your mind is insurance.

  • I operate out of my home, so what is the risk?
  • I am a sole proprietor with no assets, what’s the risk?
  • I don’t make the product; I just sell it, what’s the risk?
  • I sell over the internet, so no one ever sees me, what’s the risk?

From the moment you think New Venture, you should be thinking insurance. So exactly when do I get my insurance, what type or how much – there is no scientific formula. As a sole proprietorship working out of my apartment selling “pet rocks” to stores. What could possibly go wrong?

  1. The moment you interact with others – think Liability insurance. Your product sold to stores, individuals, or wholesalers. Depending on the product or service you provide your General Liability insurance will typically be based on 1 of 3 things; Gross Sales, Payroll, or Leased Sq. Footage. In most cases coverage is easily affordable because insurance companies take on the gamble or risk. They know that the majority of businesses will operate without incident. Their job is to predict who won’t and cull them from the lot, a process referred to as spreading the risk and underwriting.
  2. Right along with general liability is Property – BUT you have none. You work from home; your product is shipped direct to the buyer, why? Because for a few $1,000 in property coverage the account can be “packaged” and extra, important, and sometimes expensive coverage’s can be added for free. Business Interruption, laptops, Money & Securities, Fraud, Employee Dishonesty – just to name a few.
  3. Now that you have your “package” aka BOP – as you expand it can expand. Adding Hired and Non Owned Auto Liability coverage, Crime, and even Floater coverage for high valued art work in your office.
  4. Before you get to #3 above though you will need to think about Workers Compensation. Texas is the only state in the Union that does not have a mandatory workers compensation statute requiring employers to carry this coverage. However, failure to do so can bring big consequences. The key is the loss of 3 common law defenses, and as well as heavy fines and sanctions for failure to notify employees. Okay, but who is an employee – the person that gets a W2 but also the person that gets a 1099 if you exercise control over him/her. The rules are different between the IRS and Work Comp law, so don’t guess ask us.
  5. Commercial Auto aka Business Auto insurance – when does this become important. When you buy a vehicle. No not always. Many times, coverage extends but how are you using that personal vehicle, who is using, and do you advertise on the side of the vehicle. All important questions to ask your agent because the answer may mean the difference between a covered loss and not. Don’t guess, ask your agent/broker.
  6. Now that you are established, you need to consider Umbrella or Excess liability coverage, Key Man, Group Health/Life, Pensions, possibly even Professional as well as a host of other things.

This is a lot to consider.  Call us, we would love to help! 214-265-1221