The past year may have had negative impacts on many small businesses in the United States, but there has also been a lot of innovation by entrepreneurs who have turned their part-time gigs into their main source of employment. However, these new business owners need guidance when it comes to understanding their risks, as well as the insurance solutions available to them.
According to Ryan Furmick, business leader for small business products at Progressive Insurance, he’s seen all kinds of new ventures seeking coverage, from people diving into online retail, to getting into freelance consulting work and homebuilding projects. “We’re seeing a steady inflow of demand, both in our independent agency channel, as well as our direct-to-consumer business channels,” he noted.
What these entrepreneurs may not know is that the moment they accept money from a customer in exchange for a good or service, they’ve created a liability exposure. For example, say a consumer who has hired a contractor to do work at their house is then injured or their property is damaged as a result of that service; the business owner could be held liable for those damages.
“At a minimum, a general liability policy would help cover that risk,” said Furmick, adding that on the other hand, “If you think about someone who provides advice for a living, like a consultant, or tax preparation, like a CPA, that’s where you really need a professional liability policy.”
Moreover, depending on where the small business owner does their work, and if that’s at a fixed location that they rent or own, they need to be thinking about commercial property coverage, as well as coverage for business contents, if they’re storing inventory at the location.
Then, if the business is hiring employees, workers’ compensation becomes a need in many cases, and if they’re using their vehicle to go to customers’ job sites or deliver goods to customers, they should look at a commercial auto policy, explained Furmick.
Insurance coverage becomes that much more important considering the new risk landscape that many small businesses face today.
“The biggest change that we’re seeing is that folks that previously ran a brick-and-mortar establishment a year ago are doing more online fulfillment of orders or advocating placing orders on their website,” said Furmick. “Maybe they’ve even closed that location or are conducting the business out of their home. Those all create different exposures – if you move to a purely online operation, [for example], the risk of customer data being compromised creates that cyber liability risk.”
Insurance agents working with small business owners can provide them with guidance on how evolving the business in this way could impact their exposures, and in turn, can check to make sure that they’re covered for all of the risks that could affect the business negatively.
One key item when working with newer small businesses, especially in the current economic environment, is keeping cost-savings top of mind.
“Given the past 12 months, we’ve seen that many small business owners have encountered some changes in their business operations … They may have fewer employees and lower payrolls than they did last year, or maybe they have a decrease in sales and that results in lower revenue,” Furmick told Insurance Business. “That lower payroll or reduced sales volume could mean a lower policy premium for the customer, so it’s important to make sure that they’ve talked to their agent or carrier to make sure that that the agent or carrier has that up-to-date information so that the policy is rated correctly.”
Notably, with the April 15 tax deadline coming up, most small enterprise owners will have to provide accurate information about their business for the year ended December 31, which makes now a good time for insurance agents to reach out to their clients and confirm that their policies are rated correctly.
“The other thing too, is for businesses that use a vehicle in their operation – if they’re using it less than they were say 12 months ago, a usage-based insurance offering, like one from Progressive, can help those customers save money and better manage their fleet of vehicles,” added Furmick.