Professional and small business insurance are very important. Of course, the nature of insurance won’t enhance your profits, but it functions as a spectacular loss limit mechanism. Without it, an unfortunate turn of events may torpedo your enterprise. Here we will go over what to be aware of when buying insurance for a small business: awareness of the business’s physical location, the target market, risk and litigation assessment, and insurance coverage limits.

Physical Location

Insuring against events like theft, vandalism, floods or extreme weather is largely a function of local crime and climate statistics, respectively. Sadly, those who would need such insurance the most will end up paying the most for a given level of coverage. When pricing your products/services, it is foolhardy to try to underprice the competition if doing so forces you to skimp on coverage that could save your business when natural or man-made large-loss events hit it.

Litigation Risk

Getting sued by a contractor or employee you hired can be a disaster and a slap in the face when you thought you had a good relationship. Likewise, lawsuits from customers can prove ruinous not only through a legal ruling but due to public relations if the case becomes newsworthy. As such, general liability coverage, especially if tailored to your specific type of business, is an excellent first step to maximum protection from the ruinous effects of unfavorable judgments.

Cash Flow Assessment

Here we come to the type of business you have and its risk/reward profile. Insurers understand that small businesses have hiccups and bumps, but that doesn’t mean they will overlook missed or incomplete payments. A small business has to manage its liquidity and cash flow such that it can make regular payments to its business insurer. Here, the key is to avoid being asset rich and cash-poor over an extended time period. Growing your business is not a sprint race. Growth is strategic and avoids the trap of spending cash required for insurance premiums and other short-term needs in favor of speculative and risky “jackpot” payouts.

Coverage Limits

Lastly, too much of a good thing is not necessarily better. According to this site, insurance for liability, property, income interruption and other aspects of business operations specifies coverage limits. This can be a dollar amount, a time frame, or other details best settled between you and the insurer. In any case, the most expensive and generous coverage is reserved for enormous operations or extremely unlikely events that a reasonable entrepreneur can safely ignore. There exists a balance between good coverage and spending all your revenue on exorbitant premiums. Finding it is important to healthy business growth.


The type of business, specifics about operations and sales, location, target market, hiring strategy and more will influence the price of a given coverage level. Nonetheless, very generally speaking, business insurance is a wise investment. Again, insurance coverage will not lead to riches, but it will defray painful losses.