You’ve worked hard to hone your skills as a home services provider. And you’ve built a great reputation in your neighborhood in the process.
At this point, business insurance may just seem like an extra precaution. After all, your customers love you! Surely any issue can be worked out amicably. Right?
Maybe. But that’s not a risk you can afford to take.
Like your home, your car, and everything else of value you own, your business needs protection from any situation that could put it in peril.
In this article, we’ll hammer home why business insurance is essential for every home services professional. Plus, we’ll give you advice on how to choose the right coverage for your business.
Let’s dive in.
What Is Business Insurance & What Does It Cover?
A business insurance policy protects business owners from hazards that could occur while doing their work.
This includes accidents, property damage, and even lawsuits from disgruntled customers or employees. These can all cause financial disaster for a business owner without insurance.
Business insurance covers a broad range of problems that might arise during your work.
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Why should I have business insurance?
Nobody thinks accidents are going to happen to them until they do. One mishap can cost you your entire business.
Comparatively, that makes investing in business insurance a pretty good deal.
Here are some other reasons why business insurance is a must for home services providers:
- Accident coverage. If you own a home services business, you’re more than aware of the possibility of accidents. Especially given the often-hazardous nature of your work. Business insurance can protect you and your employees from potential accident damages.
- Lawsuit protection. Most of your customers won’t resort to legal action if they don’t like a finished project. But it only takes one lawsuit to make a massive dent in your finances.
- Reduced customer risk. When you have full business insurance coverage, potential customers know that you’ll protect their interests in case of an accident. Many contracts even require that providers carry insurance. It’s a small price to pay for a better chance to land more customers.
- Compliance with local, state, and federal laws. Federal law requires you to have workers’ compensation insurance and other coverage if you employ outside help. Local and state authorities might also require specific types of policies for home services companies.
- Assurance that your business will continue despite a major disaster. A 2021 Federal Reserve survey found that 63% of all small businesses that suffered losses due to natural disasters had to close temporarily to make repairs. Having adequate business income insurance and business interruption coverage can protect both you and your employees from losses due to such closures.
Won’t having an LLC protect my business?
Structuring your business as a limited liability company (LLC) or a corporation can protect your personal property from lawsuits.
However, it won’t protect your business. And if you’re like most contractors, you’ve already invested a huge chunk of your personal property in your business.
Having business insurance will cover your business itself from unexpected disasters.
What types of business insurance should I consider?
Different business insurance policies cover different needs.
Depending on what your company does, you may need some or all of the following types of business insurance policies:
Professional liability insurance
This type of insurance protects your business against claims of negligence by your customers. Liability insurance covers claims that result from allegations that you or your employees made a mistake during your work.
It also covers “failure to perform” claims. These might come up if you don’t provide the services and products you agreed to finish in your contract. Coverage varies depending on the type of work you do.
For instance, a home builder would need more protection than a home cleaning service. This is because errors in construction could cause more permanent damage than a sloppy cleaning job.
Your insurance company can advise you on the type and amount of liability coverage you need for your home services profession.
Business property insurance
Property insurance protects your business’s property (go figure).
This can include covering the cost of damage to equipment, materials, and signage from theft, storms, fires, or acts of vandalism.
Usually, business property insurance doesn’t cover earthquakes or floods. If you work in an area where those are common, you’ll need to consider an additional policy that covers them.
Another important thing to note is that homeowner’s insurance won’t cover any business damages. So, if you run your business out of your home and think you’re covered by that alone, think again.
Product liability insurance
If your home services business manufactures products, you’ll need separate coverage for that. Products can include things like cabinetry, furnishings, appliances, and so on.
This type of insurance protects you from lawsuits that allege damage caused by your products being faulty.
Commercial vehicle insurance
Any vehicles you use in your business should have full insurance coverage. You should also have a comprehensive policy for each of your business vehicles.
Comprehensive policies reimburse you or cover repairs for the vehicles you use in your work.
Although having comprehensive coverage might cost more, it’s well worth the investment. After all, you depend on your vehicles to get you and your equipment back and forth to each job site.
Inland marine coverage
Inland marine insurance protects your business assets from damage or loss you might incur while transporting them by land.
If you transport valuable equipment from job site to job site, you might consider this policy.
Business interruption insurance
A business interruption (BI) policy protects your company from events that could cause you to be unable to conduct your everyday business. This can include fires, vandalism, storms, and similar issues.
Here’s what a BI policy will usually cover:
- Losses in income
- Lease or rent payments
- Relocation costs, if necessary
- Loan payments
- Employees’ wages while you make repairs
Like property insurance, most BI policies do not cover floods and earthquakes. You can, however, purchase additional insurance to cover such events. You can also include a clause that covers events in which government authorities force a temporary business facility closure.
Most insurers exclude losses from disease outbreaks since they don’t affect your physical facility. However, you might be able to purchase an “all-risk” policy that does cover such events.
Business owner’s policies
Small businesses are eligible for a business owner’s policy (BOP). A small business is considered a company with 100 or fewer employees and annual revenue up to $5 million.
These umbrella policies can include business property, business interruption, and general liability coverage.
Federally and state-required coverage
If you have employees, the US government requires you to carry disability, unemployment, and workers’ compensation insurance.
These policies protect your employees’ interests in case they become injured on the job or lose their jobs due to layoffs.
Your state might have additional requirements. So, be sure to double-check your state’s laws to ensure you have all the coverage you need.
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How Much Does Business Insurance Cost?
A variety of factors play into how much you’ll pay for business insurance.
Here are the most common ones:
- The number of employees you have
- Your annual sales
- The value of the business assets you’re insuring
- The risk factors involved in your work
- Your experience in your specific industry
- The condition and size of your premises
- What types of policies you’ll need
- Your business’s location
- Your credit score
- Any prior insurance claims
How do insurers calculate your annual business insurance cost?
Insurers hire actuaries to help calculate a fair business insurance policy price.
Actuaries are specialists with an extensive background in mathematics. They’ll weigh all the above factors mathematically to determine the price you’ll pay for coverage.
Always get multiple quotes before you buy. But make sure you’re comparing similar coverage.
Ask plenty of questions—and be honest with the agents you interview. Insurance companies won’t usually pay for losses due to situations you haven’t disclosed on your application.
Can you give me a ballpark figure for my insurance costs?
Insurance costs vary widely by provider and type of policy. But it’s safe to say you’re probably looking at paying anywhere from $14 a month (for only inland marine insurance) to full coverage at $341 per month.
If you pay annually, expect to pay from $169 (for only inland marine insurance) to $4,090.
How can I cut my business insurance costs?
Opting for a higher deductible on your policy can decrease the annual or monthly costs of your business insurance. But be sure you have enough in savings to cover that deductible in case an incident happens.
Also, many insurance companies offer discounts when you bundle your policies. That’s when you buy all your business policies from them instead of buying from different insurers.
Some insurers also offer discounts for paying your premium annually instead of every month. If you have enough money in reserve to pay the entire amount at the outset, you can usually cut costs in the long run.
Ultimately, though, the best way to minimize your risk, and therefore your cost, is to prioritize workplace safety.
Here are a few ways you can reduce business insurance costs and run a safer business:
- Offer employees a safety training program
- Maintaining your equipment
- Keep your facility in tip-top shape
- Take safety courses yourself
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How to Get a Quote for a Business Insurance Policy
The good news about getting a business insurance quote is that most providers offer them for free. Getting quotes from multiple providers will help you determine the best coverage and price.
Start by comparing quotes from an online business insurance marketplace. Once you have a general idea of what you’ll likely pay, narrow down your list to quotes that fall within your price range.
Next, look for area agents who represent each company on your shortlist. Working with an agent is especially important if your business is new or has recently expanded.
Although online marketplaces are convenient, there’s no substitute for in-person advice from an expert.
Be sure to take along a list of all the information that your agent will need to provide you with an accurate quote. You’ll need to provide the following:
- Your company’s annual revenue
- How many employees you have, along with their job titles
- A list of properties your company rents or owns
- A list of business assets, equipment, and vehicles your company owns
- Any past business insurance claims you’ve made
- Your current business policy, if applicable
To ensure you have all the information you need when you meet with the agent, ask them beforehand what you’ll need to provide. Then, when you meet in person, you can concentrate on finding the best policy fit for your company’s needs.
Getting Started with Business Insurance: Next Steps
Business insurance gives you the peace of mind that you’re covered no matter what might lie ahead.
With that confidence, you can focus on building your home services business. And, you won’t have to worry about your company becoming broker after an accident. (Okay, that was a stretch).
Are you ready to start the business insurance process? Here’s what you can do right now to put the wheels in motion:
- Determine what insurance types you need. You won’t know which providers to look to if you don’t know what coverage you need. Start by looking at the various types of business insurance coverage you can purchase. (See our convenient “types of insurance” section above.) Then list any of your property or business activities that fall under those categories.
- Look for commercial insurance companies. The more specialized your insurance company is in the home services industry, the better. Agents who are familiar with your unique needs will have greater insight into what coverage you truly need.
- Get recommendations. Other home services providers in your area will have a good idea of where to go for business insurance. Talk to people in your network and ask for their recommendations. You should also read online reviews to help with your comparison.
- Compare policy options. Once you have a potential provider list, compare policies online or speak with an insurance agent for more information. Purchasing a policy online will probably be cheaper. But you’ll likely benefit from the advice an insurance professional can provide.