Using a small business insurance agency definitely has its pros and cons. Determining the best fit for your organization takes the proper amount of research and investigation. You want to make sure that you receive great rates, but also proper coverage for you and your employees.
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When you have a startup company with precious little resources, it can be a challenge to find good insurance rates with the coverage you need. The question of whether you should go with a large insurance company or a small insurance agency will most likely be on your mind.
Luckily, there are ways for you to secure the type of protection you require against issues like liability, property damage, worker’s compensation, and unemployment insurance. You may also want to purchase healthcare as a way to recruit employees.
Get Help from the SBA
To get started you will need a few pointers, and this is where the Small Business Administration comes in especially handy. They can help you in many ways, especially in confirming what types of local resources you have at your disposal. They can also assist you with categorizing your company.
For example, in some states you qualify as a small business if you have only one employee–yourself. In other areas, you may need as many as 50 to qualify as a small business.
The majority of these decisions lie in the type of work your company performs and the amount of revenue it generates.
At any rate, the fact remains that you will still require some level of insurance and so this leads back to the main focus of making the proper selection. For most small businesses, the online route will not work. This means you may need to locate an agency that can take you on as a customer and guide you through the process.
Providing the Personal Touch
Working with an insurance agency is sometimes a preferred method of small business owners because they can provide a personal touch. They have real people that understand the entrepreneurial spirit and this adds to their appeal. They look at your business as an investment and take the time to make sure you will succeed.
Unlike some of the larger corporations that may just rely on telephone and email contact, a small business agency takes care of its customers on an individual basis. The hands-on approach allows them to create a unique policy that is tailored specifically to your needs and is not some generic, cookie-cutter plan that anyone can use.
They also set appointments for face-to-face meetings, which gives you their undivided attention. You do not have to feel rushed, or worse–like you are intruding on their time. As you discuss your options, you can rely on their professional skills as they take control and move you through the steps efficiently.
They Are Usually Local
Another positive factor is that most of the smaller agencies are local, which means they understand many things that you will face in your geographical area. For example, some regions are prone to hurricanes or flooding more than others.
For instance, take the events in New Jersey during the summer of 2011, when Hurricane Irene blew through. A local agent would have specific understanding if a region is prone to these types of catastrophes. They would definitely recommend specific coverage to protect against property damage caused by rain and excessive winds.
According to the National Oceanic and Atmospheric Administration (NOAA), Hurricane Irene caused one billion dollars in damage in just over 48 hours.
Only an agent who is familiar with this region would know that hurricanes are prevalent in the Northeastern. In fact, they would know that the East Coast actually has a hurricane season each year.
They also realize that the waterways in New Jersey are vast and numerous. There are large rivers and lakes and small creeks too. Some towns, like Wayne, New Jersey, consistently flood, even with just a few inches of rain. Having experience with these disasters is a definite advantage in using a local insurance agent.
You also have a level of trust because they are your neighbors. At some point, you may even run into them at the local grocery store or bank. When they live in the area, you can bet that they know the insurance needs of that area.
They Have Expert Knowledge of State Laws
Since insurance companies report to their own state’s Department of Insurance, all agencies doing business with smaller organizations must have keen knowledge of their state laws. Their license to write policies dictates that they continually educate themselves on any and all changes.
These updates keep them abreast of any new developments. For these reasons they are experts in any laws regulated by the United States Department of Labor, including worker’s compensation.
Many small companies have huge risk factors because of their employees. Even one worker can cause an employer huge insurance increases if they do not follow the established policies. This can mean safety practices or even security issues.
One good example is an employee who allows their family or friends to visit them during work hours. This can leave a business owner open for liability lawsuits if someone is injured. The owner has no obligation to insure the visitor; therefore, this presents a security risk. While their liability coverage will certainly pay for any injuries or litigation fees, it is still an unnecessary loss.
Your agent can also help you identify your tax obligations because they work closely with the Internal Revenue Service.
As a small business owner, you must have knowledge of the unemployment procedures. While building your policy, you can talk about ways to keep your unemployment insurance costs low.
A small business insurance agency can give you tips about your hiring practices to ensure you know what kind of characteristics to look for and advise you about proper training. An employee who has sufficient training is less likely to engage in risky behavior on the job.
They can teach you about the claims process in general terms and provide you with ways to reduce the number of unfounded complaints. When you do receive an unwarranted claim, you will know the proper steps to follow to increase your chances of a dismissal of the claim.
They Bind Contracts and Agreements
Since an agent is an independent contractor and does not work directly for the insurance company, they can bind your coverage. This means they can legally obligate insurance companies to supply you with the level of protection you select. They must agree to the conditions of the contract or agreement.
This is a huge plus for you because you want to make sure that your rights are protected and no loopholes exist. Most insurance policies are difficult enough to understand on your own. Having an agency that backs your selections ensures that you have an advocate. You can concentrate on growing your company and let them focus on your protection.
Just make sure you choose an exclusive agency, rather than a non-exclusive agency. The perks are better if your agent only works for one insurance company. The odds are greater that you will have a stronger relationship with the agency that only solicits from a single provider.
This is especially true when they make internal changes. It can become difficult to stay educated on the inner workings of more than one insurance carrier.
However, Availability May Be Limited
Of course, there are drawbacks to working with an insurance agency when you have a small business. One of the biggest challenges you may face is their limited availability. This means contact and policy offerings.
The larger corporations obviously have more capital, which means they expand their coverage to a multitude of levels. They may have dozens of types from which you can choose. You may also have the opportunity to include commercial car insurance as part of your entire policy. Most of the smaller agencies may only provide you with mandatory protection.
They may also have shorter hours of operation and fewer business days. Unfortunately, these types of offices generally have fewer employees. They may not be available during the evenings, unless you make an appointment, and they usually close for the weekends.
Coverage Can Cost More
You may encounter higher costs if you select a small business insurance agent because they often work on a commission basis with the insurance company they represent. In other words, they receive more money when they sell more coverage.
This may prompt your agent to recommend additional levels of insurance solely to make sure they meet their minimum requirements, and not because your small business necessarily needs it. It is something you definitely need to consider.
If you are just starting your new business, you may not have the extra funds. Your plan might be to get the exact amount of protection you need to make your business operational and compliant with state laws. Once you begin to see growth, you can add more coverage.
Of course, adding coverage to keep up with business growth, as you add more levels of protection, will cause an increase in your annual premiums.
The other issue surrounds the number of workers you employ, especially if you plan to purchase health insurance. While there are small group plans available, the discounts usually apply to a certain number of employees.
While there are advantages and drawbacks to consider, it is wise for you to start making decisions sooner rather than later. In most states, you must have some type of insurance when operating a small business. It is only to your benefit that you take the time to review your options. If something happens before you obtain coverage, it will be too late.
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