What Types Of Insurance Do Small Businesses Need?

August 13, 2020 11:40 newlambertagency

If you own a small business, there’s no denying that the most important thing you need to protect your assets and finances is an insurance policy. But even small businesses differ in various aspects – some usually function with 10 or fewer employees, while some focus on smaller operations with just 3-5 staff.

Naturally, various types of insurance cater to different businesses’ needs. However, one thing’s for certain, and that is, finding the right insurance. And let’s face it – all businesses confront an element of risk daily, regardless of their size or the industry they are in so the need for insurance is indisputable

  1. Life insurance: As popularly known, this policy protects an individual (employee) against death. This type of insurance helps with peace of mind and builds overall morale and trust between the company and employees.
  2. Health insurance: Health insurance is no less than wealth insurance for employees on a payroll – it functions as a financial safeguard in case of any unforeseen health problems caused by accidents or disease for themselves or even for their family members. It ensures the financial security of employees and as a result, they perform better.
  3. Dental/Vision: Dental insurance pays a portion of costs associated with preventive, minor, and some major dental care. While Vision insurance and vision benefits plans typically cover the cost of an annual eye exam and prescription eyeglasses and/or contact lenses.  Although not many businesses offer them, these kinds of benefits help attract new workers and retain current employees.
  4. Key Person Insurance: Also called as Keyman insurance, it is simply life insurance that covers the key person in a business. In a small business, this is usually the owner, the founders, or perhaps a key employee or two. There are the people who are crucial to a business–the ones whose absence would sink the company. You need to consider key person insurance on those people.

What do small businesses must consider when choosing each type of insurance?

Major medical plans are expensive and not always better. With network restrictions, high premiums, deductibles, co-pays, and max out of pocket requirements, they can seem a bit worthless.

Major medical plans also require minimum participation rates and if a member in the group has excessive claims, it may result in an increased rate for everyone in that group. Individual plans with group billing options are often a better option for small employers. However, if someone in a small group requires maternity or has a major pre-existing medical condition, true major medical may be required to get everyone covered.

The payment method should also be given key consideration. For instance, when it comes to dental insurance, some plans pay a fixed fee for dental procedures. Payments may be made directly to dentists by the insurance provider. Other fixed fee plans reimburse the employee while indemnity plans make the insured employee responsible for paying the dentist. The insurance provider then reimburses a portion of the cost.

Also, you can avoid any inconvenience in case of a claim by knowing what is included and what is not. You can always consult your insurance agent in case some things are not crystal clear to you. Take time to read the terms of the policy and make sure to update them regularly to cover significant changes in your business.

Is there anything else a small business owner should know about choosing insurance?

If you’ve decided on choosing an insurance policy, you must know a few important things beforehand.

For instance:

  1. Is your guaranteed renewable?
  2. What happens if your business partner dies unexpectedly?
  3. Can you use your doctor or hospital?