By Callie McGill, ValuePenguin, Inc.
Watching your company grow can be exciting, but it can also come with increased liabilities. As you hire more workers and expand your operations, different risks begin to evolve. Many small-business owners don’t realize there are ways to mitigate certain risks associated with owning and growing a business.
Three insurance products—health insurance, a business owner’s policy and auto insurance—can help any entrepreneur manage risks associated with their small-business growth.
Any small business that brings in new talent should prioritize protecting that talent, and health insurance is one way to do so. According to research from the University of California, Los Angeles, employees are more productive when they’re healthy and can greatly benefit from wellness programs.
For small businesses, health insurance is not a mandatory purchase. If your business can be defined as a “small employer” (fewer than 50 full-time or full-time-equivalent employees), you’re not subject to the Affordable Care Act’s employer mandate. However, your legal definition changes to an “applicable large employer” (ALE) once you have 50 or more full-time employees, so you’ll want to keep an eye on your employment numbers.
That said, there are still notable benefits to offering health insurance, even if it’s not a legal requirement for your business. A 2018 survey from America’s Health Insurance Plans (AHIP) found that a majority of workers (56%) considered health care coverage a “key factor” in their choice to stay at their current job. Without employer-sponsored coverage, employees can buy individual and family health insurance plans through the online state insurance exchange—but it’s a costly option. In Florida, for example, the average monthly cost of health insurance is $598 for a single adult with midtier coverage. Alternatively, a single Florida employee enrolled in an employer-based health insurance plan contributes an average of $120 to the plan every month.
And while it’s easy to think employees don’t realize or appreciate the cost of health insurance, most actually do. The same AHIP survey found that 77% of employees felt more favorable toward their employers when there was more information transparency regarding the costs to provide insurance.
Price is the biggest factor that causes many small-business owners to shy away from health insurance. However, small-business owners can get help paying for the costs of healthcare.
The Small Business Health Options Program (SHOP) is a tool small business owners can use to find affordable health insurance for themselves and their employees. Set up as part of the ACA, this insurance exchange allows small businesses to shop for health and dental plans. What’s more, employers can receive a tax credit of up to 50% of their contributions on employee health care premiums, or a credit of up to 35% for tax-exempt businesses.
Small business owners can find additional options, albeit without the tax incentives, to meet the needs of their employees through online small business resources such as Wellthie.
As small-business owners enjoy reduced costs, employee retention and higher productivity, offering health insurance should be a top priority for any entrepreneur.
Business Owner’s Policy
Most businesses have two large concerns from the outset: protecting the businesses against liability lawsuits and protecting business property from damage or loss. Quite often, businesses purchase general liability coverage for the former and commercial property insurance for the latter. However, these two concerns can be combined into a business owner’s policy, which can help reduce a lot of headaches and paperwork.
Individually, general liability and property insurance are among the most important coverages for a business. General liability insurance protects your business if it’s at fault for incidents such as bodily injury, property damage, false advertising or libel claims. The policy covers the business owner and any employee who’s found liable while representing the business.
Commercial property insurance is designed to protect your business property against common losses such as fires, theft, vandalism or other events that may result in a loss of your ability to use your physical resources. Many property insurance policies even provide for business continuity, so your business won’t need to shut down due to loss of income.
With both concerns on the table, it makes sense to combine them into one package. In many cases, insurers offer a discount to small businesses that purchase a BOP instead of general liability and property insurance separately.
It’s easy to overlook the need for business-specific auto insurance coverage because you and your employees probably already have your own personal auto coverage. Unfortunately, personal auto insurance doesn’t cover you or your employees while you use company vehicles or while you use personal vehicles for business-related activities.
That’s where commercial auto insurance policies and hired and non-owned auto insurance policies come into play. Commercial auto insurance is designed to offer standard coverage for vehicles owned and registered to your business, such as food trucks or vans used for landscaping services. The policy will cover you and your employees, which mitigates liability concerns for your whole business.
Hired and non-owned auto coverage is a special form of insurance that covers vehicles you or your employees personally own but often use for business. It offers liability coverage for any activities related to work, such as driving to an office supplies store or delivering food to customers. One survey found that 54% of small-business owners use their vehicles to conduct business, making this type of coverage considerably important given the limitation of personal auto insurance coverage.
Small-business insurance needs can vary dramatically by industry. However, small-business owners should evaluate their primary insurance needs to help avoid common risks and liabilities. It is important to collect multiple quotes and compare prices to ensure you are securing the best and most affordable coverage.