There's little more exciting than signing a lease for your new business location, but are your business insurance requirements in place?
It seems simple enough; you find a location, agree on a deal with the landlord, and start gearing up for your new business venture. You already have your favorite art on the way, and you're heading to the office supply store later to stock up on pens, sticky notes, and a small file cabinet. You even have your caterer lined up for the grand opening. There's just one (big) problem: you haven't looked at the business insurance requirements yet.
All that hustle could go down the drain if you don't meet the business insurance requirements set by the landlord, the bank, and the state.
Why do you need business insurance?
Business insurance is a general term describing several kinds of insurance your business needs. At a minimum, that usually includes liability insurance, workers compensation insurance (if you have employees), and property insurance.
Some of this is legally required, such as workers compensation insurance. Your landlord will require general liability insurance to protect the property owner from any accidents that happen on the property you lease. Your lender will expect you to carry property insurance in case of the loss of products or equipment.
Beyond that, however, business insurance is a smart business move. You put a lot of heart and soul into your business, and it just makes sense to have coverage in the event of a disaster of any kind.
7 Business Insurance Requirements
You Need to Know About
Despite the many variables, there are some requirements you should expect to have in place in order to sign a commercial lease. Or in some cases, even if they aren't required, they're a good idea.
1. General liability insurance
While your particular circumstances determine the amount of coverage you need, general liability insurance is a must. This insurance covers your business in the event of a lawsuit, injury to a customer, and other basic problems. Writing for The Balance, Lahle Wolfe points out that it's also not uncommon for a landlord to be named as an additional insured as a way to "protect their own interest."
2. Property insurance
Property insurance protects your business property in the event of a natural disaster, theft, fire, or water damage. Computers, inventory, equipment, and even income loss may be covered under business property insurance.
3. Professional liability insurance
Service providers such as accountants, mental health professionals, or contractors may need to carry professional liability insurance to protect themselves from malpractice or negligence lawsuits. You likely won't need this to sign a lease, but it's a good idea to have it in place well before you open your doors and meet with clients.
4. Workers compensation insurance
If you have employees, you're required to carry workers compensation insurance to cover things like medical expenses if an employee is injured on the job. You may not need this insurance to sign a lease, but the sooner coverage is in place, the sooner you can hire employees to begin training and getting ready for opening day. The amount of coverage you need also depends on your business. For instance, a retail job won't require as much coverage as a tree trimmer, while a high-rise construction company will need significantly more coverage than a writer.
5. Unemployment insurance
Most businesses with employees also need to carry unemployment insurance. Although paid out to employees like an insurance policy, it's a state tax, so you don't need to purchase a policy. You do, however, need to register your business with your state's Labor Department.
6. Life insurance
Besides the fact that life insurance is just a good idea, your lender may require it. It takes a lot of capital to open a business, and if something happens to you, your lender is on the hook for that.
7. Business owners package
A business owners package policy (BOP) combines liability and property insurance and may include commercial auto insurance and other coverages. Like many package deals, a BOP can save you money and provide the coverage most businesses need.
It's worth noting again that you may not necessarily need these policies to sign the lease on your new business location, and the actual business insurance requirements can vary depending on the type of work you do and where you're located.
There are also add-ons for almost any kind of insurance coverage you could need. You can enhance your coverage with policy additions for outdoor signs, damage to electronic data, or even employee dishonesty.
Of course, this is a general overview. Your best path to getting the coverage you need is to talk to your local Pekin Insurance agent and find out what policy is right for your business.