How Many Employees Do I Have to Employ Before I Need Commercial Business Insurance?
What if your company was missing something crucially important?
As an entrepreneur, you can take out small business insurance at any time. However, many owners hold off on purchasing it because they do not know if they have enough employees.
What is the minimum number of employees for insurance, and is this coverage legally required? Keep reading to discover everything you need to know.
Navigating the World of Business Insurance
Trying to figure out when to get business protection can be pretty difficult. Beyond just meeting an employee insurance threshold, you need to know the coverage basics as well as some of the myths surrounding these policies.
Below, you will find the basic information you need. Use this as a basis when you meet with your neighborhood insurance agent to start choosing the best policy for yourself and your employees.
Understanding Business Insurance Basics
Small business insurance is designed to protect you and your company from a number of different threats. Understanding if you really need business insurance is key to deciding which policies work best for your situation. Policies are generally customizable, so you can choose the types of protection most important for your operation.
For example, the most basic form is property coverage designed to protect your company’s physical location as well as the computers, furniture, and specialized machinery inside the building. General liability coverage helps you pay medical and legal bills if a visitor gets injured and holds you liable.
Those who use vehicles for daily operations can purchase commercial auto coverage. Finally, entrepreneurs who have employees will need to purchase workers’ compensation.
Identifying the Right Time to Secure Insurance
You need business insurance once you have something business-related that needs protection. For example, if you work from home and have very little in the way of commercial equipment in the house, your existing homeowners policy may provide sufficient protection. But if you have enough in the way of expensive computers and work-related equipment, you will need a plan to protect everything.
As long as your company has employees or hosts clients or customers, you will need a liability policy as a protection against lawsuits. And if you or employees drive a vehicle for work purposes, you will need commercial coverage. If you do not meet these specific scenarios but still think you need protection, it is advisable to speak to an insurance carrier about your needs.
The Myth of Employee Numbers
Is business insurance required by law? It depends primarily on whether you have employees. This has led to the myth that you must have a high number of workers before you are legally required to get coverage.
In reality, your state will determine the threshold for purchasing workers’ compensation policy. That number is often lower than you think. In Florida, for example, most companies with at least four employees are required to have this policy.
Deciphering Insurance Needs Based on Business Life Stages
As you can tell, not every business needs every form of commercial coverage all at once. Some may never need certain types of protection. However, your insurance needs are likely to grow as your company evolves.
What kinds of coverage should you have for different business life stages? Below, you will discover how to protect your company as it grows.
A One-Person Army: Commercial Business Insurance for the Solopreneur
Your solo business days may require little to no commercial coverage. For example, someone working out of their home with no employees, visiting customers, or expensive equipment might skip this coverage altogether. However, once your home has enough specialized equipment that it would be difficult to replace out of pocket, you will need a commercial property policy.
Startup Phase: Understanding Basic Insurance Requirements
Is your company in the startup phase? What new business owners or entrepreneurs need to know about commercial insurance, especially if you are seeking to grow quickly, is that you will probably need property coverage for the company’s location and equipment. You will also likely need liability protection when dealing with visiting investors and other commercial visitors.
Growth Phase: Upgrading Coverage for Increased Risks
Has your business grown to the point where you have one or more employees? In that case, you may need to purchase workers’ compensation on top of the existing property and liability policies. Different states have different requirements: for example, in California having even one employee means you must carry workers comp. However, in Alabama you only need to carry it if you have 5 or more employees.
Maturity Stage: Maintaining Comprehensive Protection
For many companies, another insurance they purchase is commercial automobile coverage. This helps protect both vehicles and drivers as they carry your equipment and goods back and forth. This is particularly useful if you have to regularly deliver supplies from one business location to another.
Expansion Phase: Adapting Insurance for New Markets and Locations
It is important to treat every new business location as a new set of challenges. You may, of course, need the exact same coverage for each location. However, if one expansion location is significantly different from others, it may require different forms of protection. Fortunately, commercial policies are very easy to customize.
Mitigating Costs: Smart Strategies for Affordable Coverage
Those who are on the fence about business insurance are usually there because they are worried about the cost. Companies with tight budgets, for example, may worry about the added expenditure of a new monthly premium.
Fortunately, there are a few easy ways to keep coverage costs down.
Bundling Policies: BOPs and Other Cost-Efficient Options
One of the ways that commercial insurance is similar to personal coverage is that you can save by bundling different policies together. For example, you can get a business owner policy (BOP) that allows you to add only the protection you need (you may need both property and liability protection but not commercial auto or workers’ compensation). Such bundling makes saving easier than ever.
Other than bundling, your best bet for saving on commercial insurance is to shop around for the best rates and speak with a trustworthy carrier about tweaking your limits and deductibles. As with personal coverage, it is always possible to find the sweet spot between protection and price.
Proactive Measures: Reducing Premiums Through Risk Management
You should consider taking charge of your business insurance by conducting a company-wide risk management review. The goal of such a review is to identify areas of weakness that may need additional protection and proactive measures you can take to reduce risks. Those measures may include mandatory safety training for employees and liability seminars for executives.
The ultimate goal of a risk management review is to help you appropriately adjust your coverage as needed. This may help you save in the short term by identifying protections you do not need. In the long term, the savings may be more significant because you greatly reduce your risk of having to ever file a claim.
Finding the Right Partner for Your Insurance Needs
So, the number of employees does impact the coverage you need. However, it’s not the only factor that dictates the need for small business insurance. Instead, different forms of coverage are needed to protect different commercial assets. As for your company, do you know who you can trust to fully and completely protect it?
At InsureOne, we provide the white-glove service to protect businesses like yours because we know they are investments in the future. When you are ready to give your investment the protection it deserves, visit us for an online quote. Of course, you can also pick up the phone and reach us at 800-836-2240. Finally, feel free to drop by an InsureOne office near you.