3 Steps For Choosing the Right Business Insurance For Your Startup—Part 2

When launching a new business, it’s crucial that you put the right insurance in place. In addition to having the correct legal entity set up, insurance is the primary way to protect your personal assets from the activities of your business.

Without the right insurance—or with too little of the insurance you do need—you could be at great personal risk from the costs of a lawsuit, judgment, or in the event of an unforeseen emergency or disaster. To help ensure you obtain the proper coverage for your new business, this two-part series discusses three key steps involved with choosing the right business insurance.

Last week in part one we talked about the first two steps in choosing the right business insurance: 1) Understanding the role of business insurance and 2) Knowing what coverage your company needs. Here, we’ll cover the third and final step in this process—selecting the right insurance professional.

Your insurance professional’s role is to make sure your business is fully protected with the proper types of insurance and levels of coverage. That said, choosing the right insurance agent for your business isn’t as simple as it might seem.

Indeed, there are a number of factors involved with business insurance that you should understand before making your final decision. With this in mind, here are three tips for selecting the right business insurance agent for your startup.

The first thing to consider is what type of insurance professional you want to work with. There are generally two different types of insurance agent: a captive agent and an independent agent.

Captive agents are employed by a single insurance company, and they can only sell that company’s products. This means the prices, coverages, and premiums they offer will generally be limited. Plus, the agent’s loyalty will lie with his or her particular company, so they might not be capable of providing you with the best coverage available.

On the other hand, independent agents work with numerous different insurance companies, so they’ll have access to many different policy and coverage options. As their client, this can give you an advantage, and allow them to put your needs and preferences ahead of a particular insurance company's bottom line.

In light of these differences, you may want to consider finding an independent agent. He or she will be able to search all available policy options from multiple insurance companies, which should ultimately provide you with superior coverage.

These days, businesses are highly specialized, which means your company will likely have unique coverage needs. Your insurance professional is your partner in minimizing risks, so it’s vital they understand the exact nature and scope of your business. An agent that truly understands your industry and operation is far more likely to get you the proper coverage than someone who sells generic policies to every client, regardless of their individual risks.

While your insurance agent might not know everything about your business, he or she should be diligent enough to take the time to develop a thorough grasp of your operation’s particular needs. To this end, when you meet with a potential agent, watch to see what kinds of questions he or she asks and what level of knowledge the agent demonstrates about your industry. 

Some things to look for in regards to this include:

• Does the agent ask relevant and thorough questions about your business, your goals, and your assets?
• Do they understand the unique nuances of your company?
• Do they grasp the risks that are inherent to both your industry as a whole and your particular operation?

Although you may feel like you know everything about your specific business, the right insurance professional can provide you with additional knowledge about your industry and competitors, combined with specialized knowledge of the latest insurance products. From there, the agent can test your assumptions, analyze your business practices, and offer custom solutions designed to minimize the risks your business faces at every level.

Ultimately, what you really want is a trusted advisor—someone who will really get to know you, get to know your business, and be available to help your business adapt and evolve over its entire life cycle. An insurance professional who fits this bill will typically ask specific types of questions, which should include the following:

• What is your plan for your business?
• What is your growth strategy?
• What is your exit strategy?
• What is your long-term vision for your company?

Once an agent really understands your business, your life, and your vision, he or she will tailor an insurance proposal to your specific situation and provide you several different options to choose from.

Finding the right insurance professional is a key aspect in creating your business’s legal, insurance, financial, and tax (LIFT) foundation. Take the time to look around, and always interview multiple people before making your decision.

We can assist you with your search to help ensure you don’t end up with someone who’s going to sell you products you don’t need or leave you with the wrong type of coverage. Before you hire an agent, consult with us, as your Family Business Lawyer™, to evaluate the optimal types and levels of insurance your business should have in place.