When you purchase insurance for your business, there are two numbers that you need to pay attention to. One is your premium, which is how much you’ll pay monthly, quarterly, or semi-annually. The other is your coverage. This amount lists how much insurance you have, should you need it. Insurance companies tend to set these amounts based on various criteria, ranging from how much you think your business and building are worth to the premiums that you can afford each month.
Once these policies are in place, most businesses don’t update them, and simply keep paying for the same insurance coverage year after year. This often leads to businesses being underinsured, or not having enough insurance coverage, as the business grows.
Is yours one of them? Here’s what you need to know.
Your Business’ Value
It’s easy to look at your balance sheets and see how much money your business has made year over year. If those numbers are the same, or very similar to each other, then you may be lulled into a sense of complacency regarding your insurance coverages. After all, if your business only makes so much, it can only be worth that much, right? So, why change anything?
As it turns out, this isn’t true at all. Even though your small company brings in the same amount of money, it can still escalate in value. Things like the cost of your client database, your proprietary information, and the products that you make or services that you offer are worth money, so you need to include them in your valuation.
Your physical property needs to be included in this, too. With the rising price of real estate, a small business in a prime location can watch its value triple or even quadruple over several years. Because of this, you need to make sure that your insurance is up to snuff.
What Needs to be Covered?
Your business insurance coverage needs to be high enough to include several things, including:
The overall cost to repair or rebuild the structure itself – Since the prices of building supplies and labor have gone up, your insurance coverage needs to as well. You also need to add the cost of your physical products, should you run a warehouse or a manufacturing facility.
The worth of your proprietary information – You need to have a special policy for this that will help should your designs or plans end up in the hands of a competitor.
The price of medical bills and lost wages – Should someone, like a customer, salesperson, or even the visiting family member of an employee get injured on your company’s property, your business needs enough liability and umbrella liability in place to pay for their medical bills and lost wages.
Contact Spivey Insurance
If you believe you may need to increase the coverages on your business insurance policies, contact Spivey Insurance. Our knowledgeable employees can answer any questions that you may have, as well as find the right policies and coverage amounts for your small company.