10 Things You Need to Know About Small Business Insurance

We live in an unpredictable world. As a small business owner, no matter how insulated you think you are from risks, the unexpected can still wreak havoc on your livelihood.

Did you know that 40% of businesses will file an insurance claim over the next ten years?

Consider the five most common business insurance property claims, according to Insurance Journal:

  • Burglary & Theft
  • Water and Freezing Damage
  • Wind and Hail Damage
  • Fire
  • Customer Slips and Falls

Can you be certain that none of these calamities will happen at your place of business?

Damages can get expensive fast. Consider the top ten costliest property and liability claims against small businesses in 2020:

  1. Reputational Harm ($50,000)
  2. Vehicle Accidents ($45,000)
  3. Fire ($35,000)
  4. Product Liability ($35,000)
  5. Customer Injury or Damage ($30,000)
  6. Wind and Hail Damage ($26,000)
  7. Customer Slip & Fall ($20,000)
  8. Water and Freezing Damage ($17,000)
  9. Struck by Object ($10,000)
  10. Burglary and Theft ($8,000)

Are you prepared to cover any of these out-of-pocket expenses?

Without the right coverage mitigating the right risks at a reasonable price, that’s exactly what will happen.

We’re sharing the top 10 things you need to know about small business insurance (also known as commercial insurance) including 10 easy ways to reduce your insurance premiums.

Shh, that part’s a secret. Read on!

#1 – Understanding Your Business Risks

Did you know that conducting your own risk assessment for your business may help you get better insurance rates?

There are a few reasons for this.

First, by showing your insurer that you’re actively involved in mitigating risk, you may be able to reduce your rates. Insurance is, after all, all about reducing risk and the potential for policies to be paid out in the event of a claim. The best-case scenario is never to have to file a claim so that you remain a low-risk customer and enjoy the lowest premiums. Unfortunately, that doesn’t always happen.

Second, understanding your risk affords protection against dishonest insurance providers who may inflate your risk factors to charge you higher premiums. The more you know, the less likely you are to be taken advantage of.

Finally, in this unpredictable business world of supply chain disruptions, labor shortages, pandemics, and soaring energy prices, knowing what your risks and vulnerabilities are can help you mitigate them proactively.

Not sure how to start assessing your business risks?

Read about it here or check out the Small Business Administration’s handy guide to risk assessment. It’ll give you a high-level view of your risk factors.

Don’t have time to conduct a business risk assessment? Connect with one of our agents today.

#2 – Small Business Insurance May Be Required

Did you know that state laws require you to carry certain coverage to fulfill your business obligations? Types of insurance and coverage amounts vary from state to state. Landlords and mortgage lenders often require general liability insurance as well. This type of insurance protects you and your landlord or lender from unexpected losses/events.

If you’re running a business that provides advice or services, such as a financial advisor, you’ll also need professional liability insurance.

Entities that may require commercial business insurance include:

  • State Laws
  • Landlords
  • Lending Institutions
  • Mortgage Providers
  • Clients

#3 – It’s All About Coverage

Seventy-five percent of businesses in the United States are underinsured by forty percent or more. That’s a lot of risk to take, especially when anything that’s not covered by your insurance policy will come out of your bank account.

It may be tempting to prioritize costs over coverage, but a word to the wise: don’t. The cheapest premiums now could cost you a lot more in the long run, especially if you get stuck paying out-of-pocket.

We get it. When every dollar counts, keeping costs in check is a priority for many small business owners. However, too little coverage can have disastrous consequences if something goes wrong, and the chances are that at some point, it will.

A large study of small business insurance claims conducted by The Hartford found that over a ten-year period, 40% of businesses had to file an insurance claim. So, there’s a 4-out-of-10 chance that you’ll need your small business insurance, and when you do, you’ll be happy you have the coverage you need.

Pro Tip: Buy the most coverage you can get for your budget. If you need to use it, you won’t be disappointed.

#4 – Coverage Requirements

Having the right types of insurance policies isn’t enough. You also have to have sufficient coverage.

What if your business is insured for $300,000 but the cost to repair it from, say, hurricane damage is $400,000? In this scenario, your business is underinsured by a whopping $100,000.

If you’re renting commercial property, applying for a mortgage or a loan, fulfilling contract obligations, or embarking on any number of business ventures, you need to make sure you have adequate coverage.

Consider what insurance may be legally required to operate and how much you have to protect, and then consider your business risks.

#5 – Deductibles

Deductibles—what you pay out-of-pocket before your insurance coverage policy activates—are very common for small business insurance policies.

The more you spend on a deductible, the less you typically pay for premiums. However, can your business afford to pay a high deductible out-of-pocket if you have to file a claim?

Consider this reality when setting your deductibles. You’ll want to settle on a number that gives you adequate coverage at a competitive premium but won’t drain your bank account in the event of a claim.

#6 – Buy More Than the Minimum

Buying insurance isn’t about the bare minimum. It’s about what will keep your livelihood afloat when the unpredictable happens. Legal fees alone can cost you tens of thousands and potentially put you out of business.

Keep in mind that if an employee is injured on the job or gets into a motor vehicle accident in a company vehicle, any awarded settlement will be covered by your insurance policy only up to your policy limits.

That means you pay the rest—you guessed it—out-of-pocket.

In some cases, commercial umbrella insurance can add another layer of protection if you go over your existing policy limits.

#7 – What Effects Your Insurance Rates?

Do you know the answer to this question? You should.

Insurance policies provide risk mitigation, but only under certain circumstances and conditions. Different types of policies exist because there are different risk factors and costs to cover them in the event of a claim.

Knowing which factors can affect your rates may help you negotiate lower premiums, and greater coverage, etc. These are some of the most common factors:

  • Industry
  • Industry Risk Levels
  • Location
  • Value of Business Assets (property, inventory, etc.)
  • Management Practices
  • Services or Products for Sale
  • Number of Employees
  • Annual Revenue/Income

#8 – Ten Easy Ways to Reduce Your Insurance Premiums

  1. Don’t Let Policies Expire: Coverage breaks can result in higher premiums because you’re taking unnecessary risks—a lack of coverage—in the eyes of insurance companies.
  2. Research Industry Standards & Business Risks: If you know your stuff, you may be able to negotiate your premiums.
  3. Get The Right Coverage for the Right Business: There is no one-size-fits-all approach to small business insurance, so make sure you get the insurance that covers your unique set of risks.
  4. Are You Running a Seasonal Business? You may not need the same level of coverage all year round.
  5. Shop Around: Getting quotes from multiple insurance providers is a great way to balance coverage against cost.
  6. Maintain Good Commercial Credit: This can help you negotiate lower rates because insurance providers know you’re more likely to pay on time.
  7. Promote Safe Working Conditions: Reduce on-the-job injuries and your need to file claims.
  8. Use Proper Safety, Fire Suppression, and Alarm Systems: These can reduce commercial property insurance costs.
  9. Barter Premiums: Have you been with your provider for a long time? If you’ve made your payments on time and have a low claim rate, you may be able to equate this with lower risk and rates or increased coverage for the same rates.
  10. Don’t Allow Bad Drivers to operate company vehicles. Check with your local DMV and run their driving records.

#9 – Read Your Policies

Did you know that each insurance company and policy is likely to have its own:

  • Limits
  • Premiums
  • Deductibles
  • Exclusions

This is why you need to read the fine print in your policies. We know. It can be mind-numbing and time-consuming. After all, you’ve got better things to do, like running your business.

However, how else can you get an apples-to-apples comparison when coverage and costs from one provider to the next can change drastically?

You need to know what you’re buying—and what’s excluded—to thoroughly understand your risks, coverage, and costs.

You also want to avoid any coverage gaps.

#10 – Choose the Best

You’re not only buying small business insurance to have peace of mind. You’re also buying it to protect yourself, your business, your employees, and your livelihood.

At Co-Op Insurance, we believe you deserve the best, so before you sign on the dotted line, make sure you look at the ratings and reviews of your potential providers. At the least, you want to find insurance companies with an “A” rating that are well-established and have a reputation for excellent customer service, quick payouts, and solid coverage.

You know, companies like ours.

We’ve been in business for over 50 years and are experts at protecting:

  • Restaurants
  • Offices
  • Rental Properties
  • Apartment Houses
  • Home Businesses
  • Retail Stores
  • Small Contractors
  • Farms & Mini-Farms
  • And Much More

We’ve also earned a 90+ out of 100 rating for auto insurance coverage in New Hampshire from ValChoice, which is THE gold standard in rating insurance companies. Our customers rave about us because we’re dedicated to protecting you and your business and have the record to prove it.

Are you ready to protect your dreams and achieve your business goals? Find an agent near you today. We look forward to the opportunity to serve you!


Compare Camp. 39 Employee Theft Statistics: 2020/202: Impact & Costs to Business.

Financial Web. 5 Commercial Insurance Secrets Everyone Should Know About.

Insurance Journal. 10 Most Common and Costliest Small Business Claims.

Insurance Journal. How to Help Small Businesses Avoid Underinsurance and Anticipate the Unexpected.

INC.com. Secrets of Buying Business Insurance.

Investopedia. Underinsurance.

Small Business Administration. Risk Management for a Small Business

Small Business Chronicle. How to Evaluate Business Risk.

The Hartford. The Hartford Reports: More Than 40 Percent Of Small Businesses Will Experience A Claim In The Next 10 Years.

*Disclaimer: We offer content for informational purposes; Co-operative Insurance Companies may not provide all the products listed here. Please contact your local agent to find out more about how we can help with your insurance needs.

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