When you first started your small business, you were probably juggling everything — from taking orders to figuring out how to get paid (hello, PayPal!). Now that business is booming, it’s time to think about how to protect all the good stuff you’ve built.
6 Types of Business Insurance for Expanding Companies
As your business evolves from a side gig to a profitable powerhouse, these are the six most common types of coverage to consider:
1. General Liability Insurance
This one’s a must for every business, whether you’re selling lemonade or luxury handbags. General liability insurance protects you if someone gets hurt on or around your property or if you accidentally damage someone else’s property.
2. Professional Liability Insurance
If your business provides advice or services, this coverage is a must. Professional liability insurance (also called errors and omissions insurance) protects you in case a client says your advice or mistake cost them money. This keeps a slip-up (even a perceived one) from wiping out your savings.
You’ll likely want to insure the items you use to keep your business rolling, like inventory, equipment, or mobile gear and supplies. Inland marine insurance (also known as tools and equipment coverage) protects your gear in case of theft or damage.
If you’ve hired employees or contractors (or are hoping to), workers compensation is essential. It covers medical expenses and lost wages if an employee is injured on the job. Plus, it’s often required by law in most states once you hire a certain number of people.
If you handle sensitive customer data (and you probably do if you take digital payments), cyber liability insurance protects you in case of a data breach or cyber attack. This coverage gives you peace of mind, so you can keep doing business without worrying about what’s lurking in the Wi-Fi.
As you grow (we’re rooting for you!), you may need higher coverage limits. This is especially true if you’re interacting with more clients or customers, attending events, or looking to land a new partnership deal. That’s where excess liability comes in. It boosts your existing limits to meet specific requirements.
Why Updating Your Business Insurance Is Crucial for Growth
Let’s face it: No one likes thinking about what could go wrong, but the chances of an accident, lawsuit, or even a damaged laptop will only increase as time goes on. Updating your small business insurance as you grow means you’re not left high and dry when the unexpected happens.
The good news? It’s quick, easy, and gives you peace of mind so you can focus on the fun stuff — like getting new clients, expanding your product line, or even hiring that first employee!
When to Update Business Insurance for Growing Businesses
No one likes worrying about worst-case scenarios. But as your business grows, so do the chances that something could go sideways. Here are four key milestones to keep in mind for updating your insurance:
When you hire employees – If you’re going from solo entrepreneur to team leader, it’s time to add workers’ comp coverage to the mix. It’s not just a good idea; it’s often required in most states.
When your revenue increases – Congratulations on hitting new revenue goals! As your business brings in more income, you’ll need higher coverage limits to match your new scale. Your coverage should grow along with your success.
When you work in a new location – Whether it’s a new office, store, or event venue, working in a new location means new risks, and you’ll likely need to update your insurance to include the business, building owner, city, or event as an additional insured.
When you expand your product line – Launching a new product? Adding something new to your stock? Getting your product on store shelves? It’s time to revisit your insurance, especially if it involves working with manufacturers or retailers.
How to Adjust Business Insurance Coverage as Your Business Thrives
As your revenue and inventory grow, so does your exposure to risk. So, what does that mean for your insurance? Let’s break it down:
- Increase your coverage limits: As your revenue grows, ensure your coverage limits reflect the higher value of your business
- Insure your gear and equipment: Protect your inventory, tools, and equipment from theft or damage to keep operations running smoothly
- Add product liability insurance: With more products comes more risk, so protect your business from claims (most commonly related to product defects)
- Invest in professional liability coverage: If you offer professional services, safeguard yourself from potential legal claims
The Bottom Line: As your business grows, so does the amount of stuff that needs to be protected. The good news? Keeping your coverage up-to-date is simple and allows you to avoid unexpected claims.
How to Keep Your Insurance Premium Cost in Check (Even As Your Business Grows)
We get it — insurance premiums aren’t the most exciting part of running your dream business. , But, it’s possible to maintain affordable premiums without sacrificing the coverage you need.
Shop Around for the Best Rates
Just like you shop for the best prices on your supplies, it’s an excellent idea to shop around and compare different quotes to ensure you’re getting the best deal. Be sure to look for a company that specializes in small businesses like yours so you can find tailored options that won’t break the bank.
Bundle Your Policies
If you need multiple types of insurance (like general liability, product liability, and workers’ comp), bundling them onto one policy can help lower your costs. Not to mention, it makes it easier on you and your insurance company when all your coverage is in the same place!
Maintain a Good Claims History
Insurance companies love a good track record. If you’ve been lucky so far and haven’t had to file a claim, you could maintain your lower premiums. Keep your workplace safe, secure, and risk-free to keep those rates in check.
Regularly Review and Adjust Coverage
Your business is growing, but that doesn’t mean your insurance needs to grow at the same rate. Revisit your coverage every year or whenever you hit a major milestone. You might find that some coverage amounts don’t need to change, saving you some cash.
Common Mistakes Small Business Owners Make When Updating Insurance
No one likes a hurdle! Let’s look at a few things that could hold you back as you update your insurance:
Not reviewing insurance regularly – If you’re only reviewing your insurance when something goes wrong, you might find yourself with inadequate coverage. Make it a habit to check your policy at least once a year or whenever a significant change happens.
Skipping over industry-specific needs – Just because your friend’s business insurance works for them doesn’t mean it’s right for you. Different industries have different risks, and you need coverage tailored to your specific needs.
Focusing too much on cost – Of course, you want to keep costs down, but going for the cheapest policy on the market can lead to big headaches later. Adequate coverage is worth the investment, especially when it comes to protecting your business’s future.
Protect Your Growing Business with Insurance Canopy
Whether you’re adding employees, expanding your product line, or launching a new partnership, we’ll help you tailor your coverage to fit your growing business.
Our team of licensed professionals understands the unique needs of small businesses, and we’re ready to help you scale your coverage as you scale your success.
Have a coverage question? Contact us today, and a member of our team will be happy to assist you.
FAQs About Small Business Insurance Needs
When Should I Start Reviewing or Updating My Business Insurance?
You should start reviewing or updating your business insurance whenever your business experiences a big change, whether it’s:
- Hiring employees
- Increasing revenue
- Selling a new product
- Offering a new service
How Often Should I Reassess My Insurance Policies as My Business Changes?
You should reassess your insurance policies at least once a year as your business changes and grows. If you’ve had a more recent milestone before that year mark, like hiring a team or expanding your operations, don’t wait. Update your policy right away.
What Types of Insurance Do Growing Businesses Typically Need Beyond Basic Coverage?
The types of insurance growing businesses typically need beyond basic coverage include:
- Product liability
- Professional liability
- Inland marine (aka tools and equipment)
- Cyber liability
- Workers’ comp
Depending on the type of business you have and the policy you hold, you may also need specialty endorsements for things like product recall, liquor liability, or surety bonds.
How Does Expanding to New Locations Affect My Insurance Requirements?
Expanding to new locations affects your insurance requirements by increasing your risks of third-party injuries or damages. For example:
- Selling products in more than one location increases the likelihood of a product-related claim
- Working in multiple locations increases the risk of damage you leave behind
- Traveling from one location to another puts your mobile gear and equipment at risk of theft or damage
- Expanding your operations to service more locations could mean hiring a crew
These examples show how your risks can increase as your business expands to multiple locations, making it essential to adjust your coverage accordingly.
Do I Need Different Insurance if I Hire Employees or Independent Contractors?
Yes, you need different insurance if you hire employees or independent contractors, specifically workers’ compensation coverage.
If you hire employees, you’ll need workers’ compensation. Independent contractors usually carry their own insurance, but you may need coverage that applies to both types of workers. While some contractors can be added as additional insureds to your policy, employees cannot.
