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Purchase Business Insurance | Intro

When planning your business, you will need to budget a certain amount for insurance. Your insurance needs will vary according to the type of business you own. A retailer's needs, for example, will differ from a self-employed professional's.

Pick Your Insurer(s) Carefully

When selecting a policy, it is crucial to pick an insurance company that is in excellent financial shape so that you won't get left in the lurch should you need to get reimbursed for a claim.

Insurers are rated from A++ or AAA to F in terms of financial stability. The three most well-known ratings services are A.M. Best, Moody's and Standard and Poor's.

! It is best to do business with a company rated A- or better.

Weiss ratings, another rating service, publishes the ten most stable and ten least stable insurance companies on its website:


Employer's Liability Insurance - Most retailers, if they rent their store, are required by their landlord to carry liability insurance to cover accidents or incidents which may harm customers or employees.

Property/Casualty Insurance - if you own your place of business, you should buy property insurance to cover the cost of damages in case of fire, theft or vandalism. Property insurance generally covers your damaged products and business records, and replacement income for a minimum of twelve months in case the shop is too damaged to operate. Cost is based on business income and square footage of the property. You must normally have several years of business tax records to apply.

! Many insurance companies offer a "Business Owner's Policy" or "Business Package Policy" containing both liability and property insurance at a discount. Such policies often include replacement income as well.

Worker's Compensation - If you have four or more workers, or one or more workers in a high-risk occupation like construction, you are required by many states including Florida to purchase worker's compensation insurance. Health insurance, while not legally required, is often advisable as a way to attract and retain employees, especially those making a low wage.

! Employees engaged in high-risk work might need to purchase additional disability insurance or supplemental insurance for themselves. Worker's comp only compensates your employees for accidents sustained while performing the job. Social security benefits for injured employees are also limited in scope: almost 80% of applicants for social security disability are turned down for these two reasons:

  • benefits apply only to employees will prevent them from engaging in any occupation, not just the one they were performing at the time of injury.
  • your employee must be disabled for at least five months in order to apply for benefits.

Business Overhead Expense (Business Disability) - this type of insurance may help provide you and your employees with a source of income if you become disabled due to a sickness or off-the-job injury.

  • Short-term disability insurance provides monthly benefits for periods of 3 months, 6 months, 12 months or 24 months. It provides business overhead payments to pay wages, rent, taxes, utilities, insurance premiums, business supplies, professional fees and subscription fees.

  • You will have to choose an "elimination period" or "waiting period" before you will be reimbursed for your claim. Elimination periods can be 30, 60 or 90 days. Your choice should depend on the amount of cash flow the business will have to pay expenses before your insurance will reimburse you. A longer elimination period will mean a lower premium for you.

Individual Disability Insurance - provides you with a source of income to compensate your lost wages in case of a disabling accident or injury which prevents you from working.

! Important tips for buying an individual disability policy

  • Choose a policy that is non-cancelable ("non-can") and automatically renewable with no premium increases allowed. Disability policies have "waiting periods" of 30, 60, 90 days and more. The longer the waiting period (that is, before you get reimbursed for your loss of income) the lower your premium will be.

  • Choose a policy that is "own-occupation" rather than "any occupation" so that you can be covered even if you can perform another type of job. For example, a plant supervisor who is unable to walk around may still be able to work as a typist.

  • If possible (and financially feasible) choose a policy which includes residual disability. This pays a partial benefit based on the loss of some of your prior earnings and compensates you for a return to work even if on a limited basis. This policy can be sold alone or packaged together with a total disability plan.

  • Since premiums keep increasing for this type of insurance and "non-can" policies get increasingly harder to come by, the sooner you purchase this insurance, the better.

  • The amount of your policy will depend on your annual or projected income.

Other types of insurance for a retailer might include:

  • Group Health Insurance
  • Executive Life Insurance (if you have a business partner)
  • Auto Insurance (Owned or Non-Owned)
  • Earthquake Insurance (in earthquake-prone areas)
  • Flood Insurance
  • Supplemental Insurance

Self-Employed Business Owners

A home-based self-employed accountant or computer professional should purchase health insurance (for individual or "group of one"), professional liability insurance (i.e. malpractice insurance for a doctor or lawyer), a good individual disability insurance policy, and renter's or business personal property insurance in case of damage to his or her business equipment, furniture or records.

Start My Own Business?

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Purchase Business Insurance?

Arrange my Suppliers?

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Obtain a Business Licence and the Proper Permits?

Learn About Business Taxes?

Keep Business Records?

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Learn About Labor Laws?