The Ultimate Guide To Small Business Health Insurance

The Ultimate Guide To Small Business Health Insurance

5 Steps To Purchasing Health Insurance
Step 1: Set A Budget
Step 2: Know What Plans & Benefits You Need
Step 3: Gather The Proper Documents
Step 4: Start Shopping
Step 5: Compare Quotes

Health care is daunting, complicated, and time-consuming. So, for small businesses without a large HR department, navigating the health insurance process can suck up time and energy that you simply don’t have. Are you required to have health insurance for your employees? If you aren’t required to have health insurance, should you? And how much is it all going to cost you?

The potential questions and concerns can become overwhelming. That’s why we’ve created this complete guide on small business health insurance. We want to break down this process for you to make it easy and understandable, so you can get back to what matters most — running your business. We’ll talk about what health insurance is, when it’s a legal requirement, why it benefits your business, how much it costs, where to find the best plan, and much more.

Read on to familiarize yourself with the world of small business health insurance.

What Is Small Business Health Insurance?

The Ultimate Guide To Small Business Health Insurance

At the most basic level, health insurance refers to insurance policies that cover medical expenses.

Small business health insurance is group insurance designed to meet the needs of a smaller organization that may not have a full HR department to organize health benefits.

Some employers are legally required to provide health insurance to their employees depending on the size of their business. But even if it’s not legally required, health insurance is a competitive benefit that can help set your small business apart and increase employee loyalty and — you guessed it — health.

If you want to provide health insurance but you have no idea where to start, keep reading.

Am I Legally Required To Have Health Insurance?

The answer to this question is going to come down to the size of your business. Here’s a break down of the recent health insurance laws and what they mean for your small business.

In 2010, the Federal Government passed the Affordable Care Act (ACA) and through that health care mandate, over twenty-million more Americans have had access to health care. Better known as “Obamacare,” the health mandate extended to employers and required businesses of a certain size to provide health insurance.

So, what exactly does the Affordable Care Act mandate? If your business is considered an Applicable Large Employer (ALE) with 50 or more full-time employees for more than six months out of the year, then you will need to provide your employees with health insurance as a legal requirement of the ACA.

If your business is not an ALE, then supplying health care for your employees is a choice — and a good one at that. Read on to learn the benefits of offering small business health insurance to your employees.

The Basics Of Health Insurance

Health insurance is just like any other insurance: it protects people if they need medical care due to an illness or an injury and it provides preventative care–routine check-ups, annual tests. The amount of money a person might pay for a routine visit or an emergency visit or surgery will vary depending on the health plan, however, and so understanding how health insurance works is an important first step in deciding how best to cover your employees.

There are many ways that health providers share the cost with the consumer and these choices can have a drastic effect on the out-of-pocket costs you and your employees pay under your specific health insurance plan. Here are some of the most common health insurance terms and what they mean for you:

  • Deductibles: This is an amount of money you will pay before your health insurance takes over and pays for you. (Lower premiums per month might result in a higher deductible.)
  • Copayment (Copay): This is the fixed amount you pay for services. (For example, every office visit is $20 or every prescription is $10.)
  • Coinsurance: This is the percentage of the cost you will pay for services after you’ve reached your deductible. (For example, with a 30/70 coinsurance, you will pay 30% of the cost for services and your insurance will cover 70%.)
  • Out-Of-Pocket Limit: The maximum amount of money you are expected to pay for services in a calendar year. After your limit, the insurance covers 100% of services.
  • Health Care Provider Network: This is a list of doctors and other providers that will accept your insurance.
  • In-Network: A specific list of providers/specialists your insurance will accept.
  • Out-Of-Network: Providers and specialists that your insurance may not pay for or will cover a smaller portion of the expenses.

In order to highlight how all of these terms work, here is a quick breakdown that I’m going to call “The Tale of Two Insurance Options.”

Employee A, aka Jenny:

Jenny is 25-years-old and doesn’t have any major health complications. Her employer has offered insurance through a Health Care Provider Network. She pays no out-of-pocket fees per month for her health insurance, but she has a $500 deductible (which she hasn’t hit yet) and a co-insurance policy of 20/80 for services.

One day, Jenny gets a massive headache and temporary blindness. She calls her doctor and her doctor says to go to the Emergency Room to rule out any major medical issues. At the ER, she pays a $100 copay to be seen, but then the tests they run are billed to her on the 20/80 scale. The ER visit ends up costing $6000, of which she is responsible for $1200. That visit = $1800 ($100, $500 for the deductible, plus the $1,200).

Employee B, aka John: 

John is 25-years-old and doesn’t have any major health complications. His employee health insurance is through a Health Maintenance Organization and he pays a pre-tax out-of-pocket amount of $100 a month to cover his own insurance needs. (So, over the course of the year, he will pay $1200 toward his own insurance costs.) He is having a major blinding headache, so he goes to the ER. He pays only a $100 ER copay and nothing else. That visit = $100.

These are only two scenarios, but they highlight how each type of health insurance can dramatically change how you and your employees are billed for medical expenses. It’s crucial for you to understand as an employer how nuanced the health care choice can be for your employees.

Health insurance is a specialized type of insurance and your dedication to getting it right will go a long way in establishing a positive relationship with those you employ. You want to save on cost and navigate the marketplace. Your employees want to know they are covered if they become sick or injured.

When insurance is employer provided, employers have the final choice about the structure of benefits, and while bigger costs upfront might lead to lowered costs down the road, and vice versa, it’s an employer’s responsibility to become knowledgable about these terms and insurance options and how each one might affect health care choices for employees. The growth of your business may depend on it.

Not only will understanding the basics of health insurance help you choose the right insurance plans, but the burden to explain the options may fall to you, so knowing the basic principles of how health insurance works are key.

Why Should I Offer Health Insurance?

The Ultimate Guide To Small Business Health Insurance

You may be legally required to provide this option to your employees, but if you aren’t you may be asking yourself, why is health insurance worth the cost and the hassle?

Even though you may not be legally obligated to offer health insurance, there are several key benefits of offering health insurance that may make it more than worth it for your business. Plus, with this guide, setting up your small business health insurance isn’t as much of a hassle as you might think. In this case, the pros definitely outweigh the cons.

Happy Employees, Happy Life

First and foremost, humans need to be happy and healthy, and happy and healthy employees work harder, faster, and contribute more. Worries about money and health are high on the list of what creates stress in an employee’s life, but health insurance can relieve that stress and make an employee feel valued.

Keep Your Businesses Competitive

The other reality is that employees want health insurance and are looking for businesses that offer it.

A small business committed to recruiting and maintaining talented employees needs to remain competitive in the job market. Talented employees know their worth and may not consider job offers that can’t offer health insurance. According to a 2018 Harris Poll commissioned by Glassdoor, 63% of job recruits apply for a job based on benefits offered. Health insurance is something potential employees rank as second only to salary when considering a new job offer.

If you want your business to be competitive and to grow, health insurance is a must.

Save On Taxes

If you have fewer than 25 employees and your average yearly income is less than $50,000 then you may be eligible for tax credits. Even if you aren’t eligible for tax credits, the money you spend on employee health is tax deductible. Employee-paid premiums are tax exempt.

Talk to your accountant or tax professional to see if you qualify.

Your Peers Are Doing It! 

I mean, yeah, if your friends jumped off a bridge…but when we frame what the people around us are doing as a positive, then take the plunge! More and more businesses are offering health insurance to their employees, which means that soon it could be industry standard.

Main Types of Health Insurance Plans

Small business health care coverage

As you start to shop for health insurance, you will find that there are several specific health insurance plans for you to choose from. The main differences between these plans come down to:

  • Size of the network
  • The cost for you and for your employees
  • The ability to see specialists without referrals
  • The size of the in-network
  • Cost coverage for out-of-network services

Benefits for each choice vary, so it’s important to figure out which health insurance option is the best for your business type and size. Here is an overview of each of the major health insurance plans and what they mean for your small business.

Health Maintenance Organization (HMO)

An HMO is a type of health insurance plan where there is a network of doctors that accept your insurance. Your employees only have access to providers employed through the HMO and out-of-network care is often not covered (except in an emergency). The HMO provides a lower cost option to employees but lowers the choices of providers/hospitals where they can be treated.

The HMO plan is ideal for:

  • People who want to know exactly what each visit will cost
  • Young and healthy people
  • People with known health procedures and a significant number of appointments (for example, pregnancy)
  • People who don’t need many specialists
  • Focused on prevention and wellness

With an HMO, the insured must retain a Primary Care Physician and go through that doctor for referrals to specialists. That means this plan is not ideal for people who need care across a wider geographical area (people who travel). However, out-of-pocket expenses tend to be lower and more predictable.

Preferred Provider Organization (PPO)

A PPO is a type of health insurance plan where a network of doctors agrees to accept a set payment. Unlike the HMO, you aren’t limited to in-network provers, so you have access to any health provider you choose (out-of-network providers just cost more). You also do not need a referral for specialists. While you are not limited to in-network providers, using in-network providers is cheaper. Since there are most choices, the premium costs of a PPO are generally higher.

The PPO plan is ideal for:

  • People who might spend more for more specific care
  • People who want choice on which medical professionals to visit
  • People who visit specialists and want the option to choose their own

The PPO plan is more choice for more money and gives greater flexibility on which care providers you can see.

Exclusive Provider Organization (EPO)

An EPO is a type of health insurance plan where you can only go to the doctors and hospitals offered in-network (except in the case of an emergency). It is similar but less expensive than an HMO plan, and there is a larger selection of in-network providers than with the HMO.

The EPO plan is ideal for:

  • People who don’t mind what doctor they visit
  • People who will benefit from lower deductibles and out-of-pocket expenses
  • People who might need to see specialists
  • People who might need care across a wider geographical area (people who travel)

EPO plans are similar to HMOs with the biggest difference being that you may not need a referral to see a specialist within the provider’s organization.

Point Of Service Plan (POS)

The POS plan is an insurance plan that falls somewhere between an HMO and a PPO. With A POS, you have to select a Primary Care Physician and go through that doctor for referrals to specialists. You can still go to out-of-network providers; you’ll just pay more. You will pay less if you go to the list of doctors in-network.

The POS plan is ideal for:

  • You don’t mind choosing a doctor within a provider list
  • Young and healthy
  • Have no plans for any long-term health needs
  • Have out-of-network specialists they want to see (counseling, therapy, dermatology)

Even though a POS plan is not as common as an HMO or PPO, it provides a hybrid of coverage that may be the best fit for your employees.

High Deductible Health Plan (HDHP), Health Reimbursement Arrangement (HRA), & Health Savings Accounts (HSA)

These plans are designed for someone who anticipates no looming need for health care. Every month, employees can pull out money pre-tax and shelter it in a Health Reimbursement Arrangement (HRA) or Health Savings Account (HSA). In a High Deductible Health Plan (HDHP), preventative care is often covered at 100% but any additional health costs would be paid by the employee from their HRA or HSA.

Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)

This is not technically an insurance plan but an arrangement between an employer and an employee to cover medical expenses. An employer will agree upon a certain amount of money they will reimburse the employee over the course of a year to go toward medical care. Employees may enroll in the Individual Health Marketplace and then use their QSEHRA to pay for the coverage.

Which Type Of Health Insurance Is Right For Your Business?

In order to determine which health insurance is right for your business, you’ll have to decide how much of the upfront costs you are willing to contribute to your employee premiums and what kind of insurance options would be the best fit. Here are the biggest factors in health insurance costs:

  • Medical history
  • Prescription drug coverage
  • How many visits are needed to a doctor per year?
  • What specialists are provided, if any?
  • Specific employee medical needs and history
  • Any plans you have for pregnancies, etc.

It is illegal for you as a business owner to ask your employees for health information. (For example, you have women of child-bearing age that you want to provide good health insurance for, but you cannot ask your female employees if they plan on becoming pregnant!) But knowing your employees and their needs should direct your choices.

So, ask yourself the following questions: What benefits do my employees need? How much choice am I giving my employees? What will their out-of-pocket costs be?

The answers to these questions should guide you to the right health insurance benefits. Read on to figure out where to find health insurance and how to purchase the perfect health insurance plan.

Getting Started: Where To Find Small Business Health Insurance

The Ultimate Guide To Small Business Health Insurance

Once you have decided what kind of insurance you need, the next phase is to shop for insurance for you and your employees. There are several places to look, depending on your needs. Here are the main places to find small business health insurance:

Small Business Health Options Program (SHOP)

If you run a small business with fewer than 50 employees, you may be eligible to enroll in the Small Business Health Options Program (SHOP). If you qualify, you will need to fill out a SHOP Eligibility Determination Form.

Then you can choose to sign-up directly through the insurance platforms offered in your state or work with a SHOP broker who can walk you through the process. You will need to have information on:

  • Your business address
  • How many employees you are insuring
  • Employee ages, zip codes, number of dependents (sometimes tobacco use)
  • Business Name
  • Tax ID

Sole-proprietors and the self-employed may register through the Individual Marketplace during open enrollment. Businesses with 50+ workers can explore health insurance costs through a variety of insurance companies that offer larger programs and plans (but are specifically ineligible to apply for the SHOP) year-round.

Online Insurance Carriers

Contact online insurers directly to get a quote and see what plan could work best for you. A simple Google search can lead you to many providers that will sell to you and your business directly. Those businesses include but are not limited to Kaiser Permanente, UnitedHealthCare, JustWorks (the platform for Aetna and Metlife), Humana, etc.

Join A Purchase Alliance

A purchase alliance is a private version of the government’s SHOP options. With a purchase alliance, you pick a private health exchange. Then you agree to a pay a specific amount for coverage per employee. Your employees will choose a plan offered by the purchasing alliance.

With a private health exchange, you are not eligible to receive a tax credit. However, it can be more competitively priced — and if your employees are paying for their medical care from pre-tax money, it can be a cost-effective program for you both.

Use A Professional Employer Organization (PEO)

A PEO is a business that outsources its human resources department. Since the hours required to do human resources are considered non-revenue generating, sometimes there is a question about whether or not it is worthwhile for an owner to spend their time working on payroll, insurance, claims, etc. Often, it seems more cost-effective to pay a flat rate for a different organization to take that off your plate.

If the administrative aspect of the job is taking over too many of your revenue-buildings hours and you have more than ten employees, it could be cost effective to invest in a PEO. (The cost varies per business but can run anywhere between $150-$1500 an employee.)

Hire An Insurance Broker

Sometimes you just need an expert. A broker’s job is to be the go-between an insurance company and your business. They will negotiate the sale of the insurance and they have a legal responsibility to get you the best price. An insurance agent at a firm is there to represent their firm, but an insurance broker is hired specifically to work for you.

How To Purchase Health Insurance

The Ultimate Guide to Small Business Health Insurance

You have decided that purchasing health insurance for your small business is a great idea and now you are looking for the right way to start. The process of purchasing health insurance doesn’t need to be too overwhelming: the research beforehand is the most daunting part (which you’ve already got a leg up on simply by reading this post).

Now that you know the basics of health insurance, here are five easy steps to purchasing health insurance.

5 Steps To Purchasing Health Insurance
Step 1: Set A Budget
Step 2: Know What Plans & Benefits You Need
Step 3: Gather The Proper Documents
Step 4: Start Shopping
Step 5: Compare Quotes

Step 1: Set A Budget

Take a look at your business’s budget and ask yourself the following questions: How much money should I allot to health care? How much will I contribute per employee?

You want to choose a plan that offers good coverage to your employees, but that also fits within your business’s budget. This will play a large role in which business insurance plan and provider you choose. It’s vital to know exactly what you are paying for and what you might be asking your employees to pay for.

Step 2: Know What Plan & Benefits You Need

Now that you know how much you can spend on health insurance, it’s time to think about which plan both fits within your price range and provides the benefits you’re looking for.

Here are some things to ask yourself to help pinpoint the right health insurance plan and level of coverage for your small business:

  • How many employees do I need coverage for?
  • How old are all my employees? How many of them are smokers?
  • Am I going to add ancillary options to the insurance plan? (Vision or dental? What are you willing to pay for prescription drugs? Do you want to offer a wellness program?)
  • How much of my employee’s premiums am I going to pay? (For tax credits, you will need to cover at least 50% of the premium coverage.)
  • Will I also offer insurance to dependents and part-time employees?
  • Am I going to have a waiting period before employees are eligible to collect insurance?

Your answers to these questions will help you know exactly what you need and where to look for the right health insurance providers. If you go prepared into your first meeting with an insurance agent or broker, you’ll be one step ahead of the game and off to the right start on your health insurance-buying journey.

Step 3: Gather The Proper Documents

To receive an accurate health insurance quote from an insurance broker, you’ll need to provide some numbers and documentation. Before you call an agent or a broker, make sure you have gathered and prepared the proper documents. Most often, you’ll need to provide:

  • Your business address
  • How many employees you are insuring
  • Employee ages, zip codes, number of dependents
  • Sometimes the employee’s tobacco use
  • Business Name
  • Tax ID

Step 4: Start Shopping

Whether you pass along your information to a broker or head to the SHOP site or online sites, now you’re ready to actually start making purchasing decisions. Decide if you want to choose the broker approach or head out on your own. (If you decide to outsource to a Professional Employer Organization, they will take it from here!)

There are a few things to consider when evaluating providers:

  • The financial strength of the provider
  • Customer service ratings for the provider
  • Claims service ratings
  • Plan prices
  • Policy offerings and coverage benefits
  • Provider choices.

Step 5: Compare Quotes

Study the numbers and look at the plans. It’s safe to say that sometimes the cheapest plan may not be in your best interest as a small business owner. Examine how much you can buy and how the plans work for your employees. Don’t be afraid to ask questions, push for numbers, and run scenarios with the experts. When comparing quotes and choosing the right health provider, do your research.

Read on for more advice about choosing the right health insurance provider for your small business.

Choosing The Right Health Insurance Provider

The Ultimate Guide to Small Business Health Insurance

We’ve stressed the importance of health care and the various nuanced ways plans can differ. Actually choosing the plan for your employees rests on your shoulders and choices. Start with understanding the basic terms (co-pay, deductibles, co-insurance, out-of-pocket expenses), decide how much you can afford, and then move on to comparing how those networks will work best for your employees.

If you want to get down to the nitty-gritty of choosing providers, there are several ways you can compare and contrast providers and plans. Healthcare.gov offers ratings of health plans and under an in-network plan, you can plug their name into the system and see availability and ranking. You can then sit down with the list of providers in your area and look at their rankings as well.

Here are some things to think about:

  • Medical Care: Ratings of providers will tell you how well the plan does with managing their member’s health. Individual ratings for providers will let you know how well they manage the medical care of the people enrolled in their coverage and what percentage of people are happy with their coverage.
  • Member Experience: Ratings about member experience also look at what percentage of members get preventative care, regular check-ups, and vaccines. Does the provider show a willingness to pursue healthier options?
  • Wellness Programs: Does the provider give enrolled users access to wellness programs, including stress management, smoking cessation, or weight loss programs?
  • Administrative Rating: An administrative ranking will look at the customer service rankings, overall health scores, and how well a member can access their health records online.

Once you have an understanding of the rankings and you’ve researched the providers in your area, you are ready to pursue health insurance! Decide if you want to use a broker or go directly to talk to an insurance agent, sit down, and gather your quotes.

Frequently Asked Questions

Of all the business insurance options available, health insurance can be the most nuanced. Here are some of the most common questions small business owners have when thinking about small business health insurance:

How Much Is Health Insurance Going To Cost Me?

There is no number we can give without knowing more details. It may not be that much or it may be a ton, depending on a few important factors: how many employees do you have, how old are they, what kind of plan do you want to offer them, and how much do you intend to pay?

To give you a rough idea: A company in Oregon with 40 full-time employees that wanted to offer “Gold Level Benefits” (90% coverage) through a SHOP sponsored provider and cover 100% of the premium costs, could pay around $12,000 a month for health benefits. Deductible costs, out-of-pocket limits, PPOs or HMOs — all of those decisions factor into the cost as well.

Are There Any Ways To Save On Health Insurance?

Health insurance is expensive. The best way to save money while on the hunt for insurance is to shop around. Compare as many providers as you are able and explore the bottom-line numbers with each. Another way to save would be to switch your health plan to a more limited network of providers (an HMO or an EPO).

Where Do I Find Health Insurance?

If you have fewer than 50 employees, check the SHOP marketplace for information about what providers are available in your state. If are a sole proprietor or self-employed and you want to explore the individual healthcare marketplace, head on over to healthcare.gov and select your state to get started. (Note that for individuals the 2019 open enrollment period is over.)

When Can I Enroll in Health Insurance?

The next open enrollment period for health insurance starts November 1, 2019. However, if you are a business that needs to comply with the Affordable Care Act (ACA), there are private insurance companies that will assist you at any point in the year. Employees must also wait to enroll in their business’s provided health insurance until an open enrollment period (exceptions can be made for certain life events like getting married or having a baby).

What is the Affordable Care Act? 

In 2010, the Federal Government passed the Affordable Care Act (ACA). There were many facets of the law, including lowering insurance premiums, mandating health coverage, and expanding Medicaid. One of the sections of the ACA was to mandate coverage for businesses with more than 50 full-time employees and offer tax incentives to businesses who provide health coverage.

Making the Leap

Phew. So, with all the various options for small business health insurance, the questions of cost and insurance type will come down to you and what your employees need. Ultimately, health insurance is a crucial cost of business because keeping employees happy and healthy goes hand in hand with running a successful company.

Make yourself acquainted with the terms of each insurance package and help employees understand their benefits, too. It’s easier than ever to find a way to insure your health and the health of your employees.

The post The Ultimate Guide To Small Business Health Insurance appeared first on Merchant Maverick.

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The Step-By-Step Guide To Starting And Funding A Cleaning Business

Entropy is a powerful force. If there’s one thing you can rely on, it’s that everything gets dirty sooner or later. If it doesn’t get dirty, it gets cluttered. Add in the increasing prevalence of two-income households, the pace of modern work, and long commutes and it’s not surprising that more and more people are letting their chores slide. And that’s not even taking into consideration the huge messes businesses make. The fields are ripe for the harvest — why not cut yourself a piece of the action and start a cleaning business?

Luckily, the overhead costs of starting a cleaning business are fairly low (at least up until you start adding staff). Still, you’ll want to have a good sense of what you’re getting into before you dive into the cleaning industry. It’s vital to have a plan to tackle the expenses and challenges you’ll encounter along the way.

Not sure where to start? We’ll break starting and funding a cleaning business into a step-by-step process below.

Make A Business Plan

What separates a business from a side gig? Well, a lot of stuff, but one of the bigger points of delineation is whether or not you have a business plan and a clear strategy.

Creating a business plan can be an intimidating prospect, but you don’t need to have a business degree to write one. You don’t even need to have taken a class.

A business plan is, essentially, an outline documenting what your business is, what it does, how it’s organized, its financial means, and a strategy for how you intend to grow.

There are a lot of resources online that can give you an idea of what a business plan looks like, as well as templates to help you get organized, but a typical business plan has the following parts:

  • Executive Summary
  • Company Description
  • Market Overview
  • Sales & Marketing Strategy
  • Operating Plan
  • Organizations & Management Team
  • Financials

Calculate Startup Costs

The good news about launching a cleaning business is that it’s possible to start one with relatively little overhead.

At a bare minimum, you’ll need cleaning supplies. This assumes you’ll be doing the cleaning yourself and aren’t taking on any additional employees right away. If you’re cleaning residential homes, these supplies will more or less be the same ones you use to clean your own home. If you’re getting into commercial cleaning right away, you’ll likely have to invest in equipment (and possibly personnel) that can handle larger volume messes and expansive spaces.

If you plan on cleaning as more than a side gig, you’ll also need to pay fees to register your business. This isn’t a very big expense if you’re content with running a sole proprietorship (or partnership, if you’re starting it with someone else) –usually less than $50. You can also file a DBA, which allows you to legally do business under another name (the name of your company). We’ll get a bit deeper into it in the next section.

Additionally, you should factor in any initial advertising costs, as well as transportation costs for getting yourself or your employees to the work sites.

Register Your Business

Registering your business may sound intimidating, but it can actually be one of the easiest parts of starting a business.

Why should you register your business? At minimum, it protects the name you’re using to do business so that no one else in your area can (legally) use it. It can also help you qualify for business-to-business services and services that require an EIN number.

Incorporating, on the other hand, is a more complicated and expensive process that comes with its own advantages and disadvantages.

Here are the most common types of businesses you can register as:

  • Sole Proprietorship: By default, this is the type of business you’re running when you initially create one. You and your business are, for tax and liability purposes, considered the same entity. In fact, if you want to do business under a name other than your own, you’ll need to file a DBA (doing business as) with your local county clerk.
  • Partnership: Essentially the same as a sole proprietorship, except you started it with one or more other people. By default, you’re each considered to own an equal share of the business for tax and liability purposes.
  • Limited Liability Corporations (LLCs): If you’ve seen LLC after a corporation’s name, you’re dealing with this type of company. LLCs offer limited liability protection for their owners without the full complexity of a corporation. Each state has its own rules for how to start and maintain an LLC, and you don’t necessarily have to register your LLC in the state where you’re doing business (although you’ll generally want to). LLC owners report their business earnings and losses on their personal taxes.
  • C-Corp: This is the “basic,” default form of incorporation. Shareholders are considered the owner(s) of the company and receive limited liability protection; however, the business decisions are made by corporate officers who may or may not be shareholders. The corporation is taxed separately and shareholders pay income tax on dividends. To form a C-corp, you’ll file articles of incorporation with your state.
  • S-Corp: S-corps are similar to C-corps in most ways, but come with a few additional restrictions: you must have fewer than 100 shareholders and they have to all be U.S. citizens or residents. Unlike C-corps, profits and losses are reported on personal taxes, not unlike an LLC. In addition to filing articles of incorporation, you’ll also need to file IRS Form 2553.

Get Business Insurance

Depending on your local and state laws, business insurance may or may not be optional. However, given that cleaning involves a lot of physical contact with valuable items (not to mention the fact that you will be in the profession of making floors slippery), you may want to consider getting insurance even if you’re not required to have it.

General liability insurance can protect you in the case of lawsuits or accidents, including property damage and personal injury claims against your business. It can also make your business seem more professional to prospective clients.

Your own equipment is also subject to wear and tear, as well as accidents, so you may want to consider property insurance for any items that aren’t easily replaced.

While those are the big two worth considering, you may also want to consider other types of business insurance to help cover anything from worker’s comp claims to vehicle damage.

Seek Business Funding

Now that you have a sense of what your expenses will be, it’s time to see if you can cover them out of pocket and still pay your rent. If you can’t, and are unable to tighten your belt without sacrificing the tenets of your business plan, you may need to seek some source of external funding.

Where should you look?

Personal Savings

If you’ve saved up for a rainy day, the weather might start looking pretty stormy right about the time you’re starting a business. The nice thing about dipping into your savings is that you’re not taking on debt and all the expenses that go with it.

On the other hand, you are risking your own money, along with the lost-opportunity costs of not being able to invest that money in something else.

And, of course, you may not have been able to save enough to cover your expenses anyway.

Tap Your Support Network

If you don’t have the money handy, another option is to ask your family or friends for a small loan. Generally speaking, your support network will give you a better deal than even the most competitive bank will.

Asking your friends and family for money can be tacky and awkward if you don’t put their concerns at ease. You also may damage your relationships if you aren’t able to pay the money back within the expected period of time. It’s important to take a professional and organized approach.

If you do go this route, strongly consider formalizing any agreements you make so that all parties are fully aware of what they’re risking and stand to gain from the arrangement. Create and sign a contract, just as you would do with a traditional lender.

Credit Cards

For purchases you can pay off quickly, it’s hard to beat the convenience and incentives of credit cards.

Credit cards come in both personal and business varieties. You don’t actually have to own a business to get a business credit card, but their rewards programs are generally more geared towards business expenses.

If you’re going to use credit cards, be sure to use them wisely. That means paying them off within the interest-free grace period offered by your card’s provider. For personal credit cards, this is legally at least 21 days from the time you receive your bill. For business credit cards, there is no legal minimum, but most extend a similar one as a courtesy.

Just remember, if you fail to pay your card off with that window, carrying a balance on a credit card is an extremely expensive way to finance your business. And avoid taking out cash advances on your cards unless absolutely necessary.

Recommended Option: Capital One Spark Cash Select For Business

Capital One Spark Cash Select For Business


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Annual Fee:


$0

 

Purchase APR:


14.74% – 22.74%, Variable

Spark Cash Select for Business is great for businesses that don’t have their expenses concentrated in a single area, or that don’t want to worry about complex reward programs. You’ll simply earn 1.5% cash back on every purchase you make. There’s also no limit on the reward, so you don’t have to worry about exceeding a maximum threshold: whether you spend $20 or $500,000 in a year on your card, you’ll still get 1.5% back.

You will need to have excellent credit to qualify, however.

Recommended Option: Capital One Spark Classic

Capital One Spark Classic For Business


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Annual Fee:


$0

 

Purchase APR:


24.74%, Variable

If you don’t qualify for Spark Cash Select for Business, Capital One offers an equally versatile card that’s much easier to qualify for. Spark Classic offers a similar cashback reward program, but the rate of return is 1% rather than 1.5%.

While not the most exciting card, it’s a good one for repairing your credit.

Loans

Business loans are frequently out of reach for brand new businesses–even the more risk-taking lenders generally want to see that you can keep your business together for at least six months before they’ll lend to you. That said, there are exceptions to the rule, with some lenders focusing on new businesses.

And remember, when you’re starting out you don’t necessarily need a “business” loan; personal loans can leverage your personal credit for an early cash infusion even you need it. If you’re buying a specific piece of equipment, you should also consider equipment financing.

Recommended Option: Lending Club Personal Loans

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Lending Club is a good option for individuals who may not have the strongest credit, but have a good debt-to-income ratio. The borrowing range is fairly narrow at $1k to $40k, but when you’re just starting out you don’t want to go too deeply into debt anyway. You’ll have three-to-five years to pay it off, which makes it fairly manageable while you’re building up your business.

Recommended Option: Lendio

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Lendio takes some of the frustration out of applying for a loan by allowing you to apply to their entire network of lenders all at once. If you’re thinking about tapping the alternative lending market for the first time, it’s a pretty good place to start.

They can’t necessarily help every business, but a shotgun approach can sometimes be easier than finding that one special lender.

Recommended Option: Upstart

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If you’re having trouble finding a lender who will work with you, take a look at Upstart. You’ll need to have at least fair credit and a regular source of income, but otherwise, Upstart’s way of evaluating potential borrowers is pretty unconventional (good news if you’re starting a business).

Better yet, Upstart’s rates are pretty reasonable and you’ll have three or five years (one or the other, not between) to pay your balance off. Unfortunately, they don’t currently lend within West Virginia or Iowa.

Need more options? Check out our feature on startup loans. Need a vehicle for the business? Read our auto loans guide.

Choose The Right Software

As your business grows and becomes more complex, managing the logistics of your company can become quite labor-intensive. If you don’t want to sink too many man-hours into keeping track of all that stuff, you’ll want to delegate it to a software program.

This doesn’t necessarily mean you have to enroll in a bunch of expensive SaaS platforms if it’s just you cleaning for a handful of clients, but it doesn’t hurt to know what kinds of options are available.

Types of software you may want to consider include:

Field Service Management 

This type of software centralizes processes and workflows for businesses that have employees who are dispatched to external sites for work. They often include features like scheduling, dispatching, and booking. Some also come with invoicing, payment processing, and customer notifications, so it’s quite possible to find an all-in-one service that meets your needs.

Scheduling Software

If field management software sounds like overkill, you can try scheduling software to manage your appointments and those of your employees.

Inventory Tracking

If your business is growing, and you no longer have time to run out to buy supplies every time you need them or use your clients’ stash, you may find it helpful to formally keep track of your inventory.

Accounting Software

It’s always a good idea to keep track of your expenses, accounts receivable, payroll and related issues, especially as your business grows and becomes more complex.

Data QuickBooks Online Xero Wave Zoho Books FreshBooks

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Best Cloud Accounting Software

Best Cloud-Based Accounting Software

Best Cloud Accounting Software

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$20 – 150/month

$9 – 60/month

Free

$9 – 29/month

$15 – $50/month

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Bolster Your Web Presence

A cleaning business can get pretty far on word-of-mouth and savvy networking, but expanding your reach in the digital age usually means you’ll want to bolster your web presence.

A website is still a very important way for potential clients to find out information about your business and what services you offer. Happily, for a cleaning service, it doesn’t have to be all that complicated. If you don’t want to contract the job out, there are plenty of services online that make it easy to build your own decent-looking website.

A spiffy website is only one aspect of an online strategy, however. You still need to get people to visit it. You’ll want to consider factors like search engine optimization (SEO) so that, for example, the phrase “kitchen cleaning Rochester” will return your website in the top results.

You may also want to use social media to build brand recognition, steer traffic to your site, and announce specials or changes to your services.

Delegate Work

If it’s just you and a cart full of cleaning supplies, you can skip this part. However, if you’re planning to grow beyond what one mere mortal can clean in a day, you may be taking on more people.

Employees

Taking on additional people as employees come with many advantages: you’ll be able to get significantly more work done, have a larger pool of expertise to draw from, and be more flexible with scheduling. This does come with some additional costs, as you’ll be paying some of the taxes on their salary as well as offering benefits (at least in theory), so be sure to grow your staff wisely and at a pace that fits the amount of business your generating.

In exchange, you’re allowed greater control over the parameters of how your employee works, where, and at what time. Setting a wage that’s fair and not abusing this relationship will generally improve morale and help you avoid the costly process of employee turnover.

Contractors

If you aren’t quite ready to take on employees but need additional help, you can hire contractors. Contractors are free agents who work for themselves even though they may be regularly and continuously used by a particular client (that’s you). Since they’re self-employed, you don’t have to worry about additional expenses beyond paying their fee.

Beware that many businesses make the mistake of treating 1099 contractors as employees, which can get you into pretty serious trouble. If you want to have employees, you have to hire them. As a general rule, you have no say over what jobs a contractor decides to take, the methods they use to complete the job, or the precise time they choose to do it.

Advertise Your Business

A strong web presence and social media campaign can get help get your name out, but we aren’t quite at the point where advertising is obsolete.

Since a cleaning business is constrained by geography, you have to physically send someone out to do the job. That means you can use your modest advertising budget to buy ads in your local market, which is usually cheaper than trying to grab eyeballs from several states away. Ideally, you’ll want to seek ad platforms utilized by the types of people who are likely to buy your services. Cash-strapped kids at the local state college campus probably don’t have a budget for cleaning services, for example (although some fraternities or sororities may), while busy soccer moms might.

Once you know who you’re advertising to, you can select a medium that fits your target demographic. Once you start getting new customers, ask them where they heard about your business so you can get a sense of which ads are working and which aren’t.

Even if you don’t have money to spend on advertising right away, put the word out to your own social network that you’re offering cleaning services. Word can spread fast, especially if you have a reputation as a trustworthy person.

Final Thoughts

We still haven’t invented self-cleaning spaces, so you have a potentially bottomless demand for your services. With relatively low overhead, a housekeeping or cleaning business is one of the more accessible industries to jump into, so if you have the skills and the inclination, why not give it a try?

The post The Step-By-Step Guide To Starting And Funding A Cleaning Business appeared first on Merchant Maverick.

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How To Find Cheap Liability Insurance

Accidents happen. And when you’re a business owner, people tend to think those accidents are all your fault. Maybe they are — and maybe they aren’t! Either way, a general liability insurance plan can provide protection for your business when accidents turn into lawsuits.

When small businesses are sued for damages following an accident, the financial effect can be disastrous. In many instances, a business may never recover from the fallout. General liability insurance protects your assets in the case of a lawsuit due to accidents or injury and can provide peace of mind for small business owners.

Read on for a look at some basic facts about liability insurance. We’ll talk about what type of incidents this kind of insurance covers, discuss costs and plans, and steer you in the right direction if you’re ready to buy.

The Basics Of General Liability Insurance

A general liability insurance plan protects your business from third-party claims of bodily injury, accidents, or property damage. It is the foundational insurance policy upon which most other business insurance policies are built, so if you are planning on insuring your business, general liability should be your first purchase.

Even if you don’t think your business could be the victim of a lawsuit, insurance exists so you don’t have to carry around a laundry-list of potential risks and worry about them obsessively. Instead, you can run your business and let the insurance provide protection, no matter what happens.  

What Is General Liability Insurance?

A general liability policy will cover your expenses should you need to go to court to defend an accident, an injury, or damage to property. Typically, your policy will pay for legal representation, litigation fees, out-of-court settlements, and judgments set by the court. 

What Does General Liability Insurance Cover?

Your general liability policy will cover the following broad issues that may arise with your business:

  • Bodily Injury To Someone Or Property Damage Because Of Your Business/Employees: If a customer slips and falls on a spilled Diet Coke or your contractor breaks a client’s window while working at their home, this insurance will cover the medical bills for your customer and legal costs to defend yourself.
  •  Product Liability Should Someone Sue You For A Faulty Product: If your fast food joint is implicated in a spread of E. coli or your talking baby doll toy is terrorizing children, well, your insurance company will cover the litigation costs of those two lawsuits.
  • A Lawsuit For Slander, Libel, Or Copyright Infringement: Most small businesses have a presence online and with the fast and furious pace of the internet, tweets or Instagram posts can have a quick way of gaining attention–for better or for worse. Libel occurs when you print untruths about someone and slander is when you speak those untruths to other people. Many businesses, small and large alike, have been the subject of lawsuits because of something written on the internet or an ill-conceived advertisement. A joke, a meme, an accusation about another business–all of it is another way your business is at risk.

Who Needs General Liability Insurance?

The people who need general liability insurance the most are the people who didn’t think they would need it and suddenly find themselves facing a lawsuit. Even the smallest of businesses could benefit from having basic coverage. Everyone and anyone can be at risk for a frivolous (or not-so-frivolous) lawsuit. However, you should definitely consider a general liability plan if:

  • You have a physical storefront
  • Your business has a social media presence
  • You do business at other people’s homes
  • You work with clients that might require proof of insurance
  • You offer clients a physical product
  • You run advertisements

Average Cost Of General Liability Insurance

As with most business decisions, the decision to purchase insurance (or not) comes down to cost. The good news is that general liability insurance does not have to be expensive.

According to Insureon, over 53% of small businesses pay between $400-$600 a year for general liability insurance and 21% paid less than $400 a year. There are many factors that can impact that yearly premium including your specific risks, how much liability insurance you need, and what type of business you run. The variables that will most influence the cost of your liability insurance are the size of your business, how many employees you have, the location of your business, and the accumulative risk factors of your business.

For a small business that needs one million dollars of coverage, the price can be as low as $30 a month.

How Much General Liability Insurance Do You Need?

As a small business owner, when you start to shop for your general liability insurance, you’ll have to decide how much coverage is the best for your business. A good rule is that the riskier your business is, the more insurance it may need. Also, check with your state’s business guidelines: a few states require you to have general liability insurance by law. Each business is different, but your coverage will depend on your answers to the following questions:

  • How big is your business?
  • How many employees do you employ?
  • What type of product do you create?
  • Where is your business located?
  • What kind of risks can you anticipate?

Know Where To Look

When you are ready to make a purchase, there are quite a few places to secure a general liability policy for your business. If you already have an insurance policy through a carrier, check with a broker or insurance agent there to see about adding general liability to your plan.

But with thousands and thousands of insurance carriers, how do you know which one will work well for you?

Most insurance companies carry a basic form of commercial general liability insurance. You can use a website like Coverhound, Coverwallet, or Insureon to enter your business information and receive comparison quotes.

Know How To Save On General Liability Insurance

How to save on general liability insurance

If the cost of your general liability insurance is too high or you are worried that it’s an expense you can’t afford, there are some ways to cut down on the costs of the policy. Some of these methods might require little or no work on your end, but if your business is a risky venture, expect the cost of insurance to be higher. 

Bundle Your Policy

One of the best ways to save is to bundle your general liability policy with commercial property protection in a Business Owner’s Policy (see below for a more detailed examination of the differences). Also, if you have more than one employee, you are required to provide worker’s compensation insurance, disability, and unemployment insurance, so when you bundle your general liability policy with these other insurance policies, your costs could decrease.

Don’t Overestimate Your Business Costs

When you shop around, insurance companies will want to know how much it costs to run your business. We get it, you’re human; when you talk to investors or your parents about your business, you may be tempted inflate your yearly income and the amount you pay your employees. Be warned — if you do inflate your value while shopping for insurance, your policy can become more expensive. Be accurate but conservative in assessing your gross worth and payroll expenses.

Compare Multiple Quotes

Don’t just buy the first policy you find. Shop around and compare multiple insurance providers. Use a website that specifically comparison shops for you (businesses like Coverhound, Coverwallet, Insureon, or Bizinsure).

Pay Your Premium In Full

Many insurance companies will offer a discount if you pay your yearly premium in full versus paying a monthly rate. Also, some insurance companies will waive fees if you set up automatic payments, so ask an insurance agent or broker to explore payment options that could lower your premiums.

Manage Risks

The riskier your business is, the higher your general liability insurance expenses will be, so taking extra steps to manage and minimize risks could save you some money. Sometimes this is as simple as proving to your insurance company that you are compliant in all safety guidelines and have invested in teaching your employees safety rules. Other times, moving your business’s location out of a highly trafficked area can save thousands on liability. Obviously, it might not be easy to pick up and move, but in general, finding ways to mitigate risks will lower your insurance premiums.

General Liability Insurance VS A Business Owner’s Policy

A Business Owner’s Policy (BOP) bundles general liability and property insurance. For companies with a physical storefront location, property insurance is another crucial policy that could save your business from ruin in the case of a flood, fire, or theft. You might be in need of a BOP if you fall into one of the following categories:

  • You have a physical business location
  • You have property and equipment you need to protect
  • You have fewer than 100 employees
  • You want to bundle your general liability and your commercial property policies to save money

When Cheaper Isn’t Better

As a business owner, you understand the balance between cheap and fast and know that, fundamentally, not all insurance is created equal. One of the first things you can do is check the insurance company’s rating via A.M. Best, Standard & Poor’s, Fitch or Moody’s.

But here are three reasons why cheaper isn’t always better:

  1. A small/cheap insurance policy may not offer you the protection you need. If you accept a high deductible and a low ceiling to keep monthly premiums down but encounter a legal matter that costs your business thousands of dollars, you aren’t saving in the long run.
  2. If a price is low and it seems too good to be true, then it probably is. You don’t want to find out too late that your policy has a number of exclusions that will make it difficult to file a claim.
  3. You are paying for a policy, but you are also paying for the expertise and hand-holding you’ll need if your business is involved in a lawsuit. For that, it’s worth it to look at reputable insurance companies who have a track record of helpfulness.

Protect Yourself & Start Saving

General liability insurance is sometimes called “Slip and Fall” insurance — and for good reason! A “slip” can happen anywhere and you never know when you’ll be deemed liable. According to the Insurance Journal, in 2015 the average cost of a “slip and fall” lawsuit was around $20,000. If you don’t have that sort of money lying around to pay for medical and legal fees, then a policy for as little as $400 a year is not just a needed business expense, it is imperative.

The insurance industry might be in the business of worst-case-scenarios but a general liability insurance policy doesn’t have to set you back significantly — and the protection it provides is priceless. This is especially true if you live in a state that is known to favor plaintiffs over small businesses in a court of law. Do your homework, research the best policy for your business and industry, and get covered today!

The post How To Find Cheap Liability Insurance appeared first on Merchant Maverick.

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How To Start And Fund A Catering Business: The Step-By-Step Guide

Does serving delicious food to a crowd of partygoers sound like a dream? Do you want to take your love of desserts to weddings and other special events? If so, becoming a professional caterer could be the right career path for you.

Sure, you could search your local job listings to find a catering position, but wouldn’t it be great to be your own boss? If creating your own menu and serving up delicious food and beverages at events interests you, why not start your own catering business?

Maybe it’s been a lifelong dream to operate your own catering business. Or maybe you just love to cook and want to turn it into a career. Whether you’ve already taken steps to launch your own business or you don’t know quite where to start, this post is for you.

In this article, we’re going to explore exactly what it takes to start and fund your own catering business. We’ll start by discussing how to create a business plan and why a plan is a necessity for a successful business. Then, we’ll delve into the expenses you’ll encounter and how you can cover those costs. We’ll also talk about choosing your business structure, building your web presence, and advertising methods that can bring in new customers.

Ready to go? Let’s get started on your path to entrepreneurship!

Create Your Business Plan

What Information to Bring Accountant for Small Business Taxes

Starting a business without a detailed business plan is similar to taking a cross-country trip without a GPS or a map. In short, it’s not a wise move. Your business plan should not only include details about your business in the present — your management team and your mission statement, for example– but it should also serve as an outline for how your business will hit future targets.

Your business plan acts as a blueprint, outlining how your company will become successful and profitable. For that reason, your business plan won’t look exactly like the plan of another business — even one within the same industry. However, even though details may vary, there are a few common sections that can be found in all business plans. Those include:

  • Executive Summary: Describes the content of the business plan
  • Overview: Includes background of the business, legal structure, and other key details
  • Industry Analysis: Overview of the industry, including the size, nature, and any current trends
  • Competitive Analysis: Overview of your competition
  • Marketing: An outline of your marketing strategy and how you’ll reach customers
  • Operations Plan: Description of the operations of your business
  • Management: Bios and skills of your management team
  • Financials: An overview of current and future revenues

Your business plan not only helps you hit your goals, but it’s also critical when it’s time to obtain financing. Banks, nonprofit lenders, and even some alternative lenders may require a business plan as part of a loan application, especially for startup loans.

Pick Your Niche

While it may be tempting to try to cater for every event in your area, you’re going to stretch yourself thin … and likely set yourself up for failure. Instead of trying to offer services to everyone, pick a niche.

You may already have an idea in mind. For example, maybe it’s always been your dream to be a wedding caterer. Be sure to also consider the type of food you like to make. If you prefer to make salads, sandwiches, and other lighter fare, consider catering for business or school functions, luncheons, and other daytime events. If you prefer to serve fancier entrees, consider catering for weddings and special events.

Another step to take before selecting your niche is to do some market research in your local area. Where are there gaps in catering availability? What niche is overcrowded with the competition? You may find that there a large number of wedding caterers already in your area. Unless you can bring something new to the table (being the only caterer to serve Southern-style barbecue, for example), you might want to consider filling a different customer need.

There are a wide variety of catering niches to consider, including:

  • Weddings
  • Corporate Events
  • Adult Parties
  • School Events
  • Children’s Parties
  • Festivals
  • Sports Events

With an idea of your niche and the type of food you need to prepare, you can move into the next step: planning your menu.

Create Your Menu

KDS Kitchen Display System

Once you have a niche in mind, you’ll be able to narrow down your menu choices. Let’s face it — if you’re planning to focus on children’s parties or school functions, you won’t exactly need filet mignon on the menu.

You also want to consider what type of food you’re experienced at making. While you can certainly test out new ideas in the future, you want to put your best foot forward when starting out. You also want to offer a variety of options while keeping your menu at a manageable size. Having a menu with too many items or items that contain ingredients that are difficult to source could cause unnecessary stress for you and your clients.

It’s also important to remember those with dietary restrictions. Consider adding a few options to your menu that are vegetarian, vegan, gluten-free, or dairy-free to help expand your customer base.

Performing a test run or two can help you further improve your menu. Once you have your menu in place, test it out on a few friends and family members. Get their honest feedback on where you excel, as well as where you fall flat. Tweak recipes as needed, change techniques to become more efficient, and be honest with yourself about what works and what doesn’t. Then, alter your menu accordingly.

Source Your Ingredients

After you create your menu, you’ll have a better idea of the ingredients needed to prepare your food. When you first get your business off the ground, you may be able to get the ingredients you need by purchasing from a wholesale club in your area. However, as your business grows larger and you have more events to cater, you’ll want to purchase your ingredients from other sources.

You can get fresh produce from local farmers. Start building these relationships by visiting your local farmers’ market. You can also build relationships with restaurant suppliers and food service vendors to purchase bulk ingredients at reduced prices.

Calculate Startup Costs

In many states, you will be unable to use a residential kitchen to prepare your food. If you plan to cater from home, you must contact the health department in your area to find out more about the regulations of home-based catering businesses, including inspection and permit requirements.

In most cases, you’ll need to rent space for your kitchen. There are two ways to go about this.

The first is renting your own commercial space. This is the more expensive option but is a necessity if you plan to cater full time.

If you only plan to cater events occasionally or on weekends, you may be able to rent a commercial kitchen for a few hours on the days when you need it. This is a more affordable option since you won’t have to invest in equipment, but it’s not ideal for full-time caterers.

If you aren’t renting space in a kitchen that’s already stocked, you’ll also need industrial equipment that is used to prepare your food. Some of the items you’ll need include:

  • Commercial Ovens
  • Stoves
  • Deep Fryers
  • Sinks
  • Refrigerators
  • Walk-In Freezers
  • Mixers & Blenders
  • Pots & Pans
  • Knives
  • Cooking Utensils & Tools
  • Storage Containers
  • Dishwasher

You’ll also need equipment that you’ll bring on-site for serving and keeping food at the optimum temperature, including:

  • Serving Dishes & Trays
  • Serving Utensils
  • Chafing Dishes
  • Carving Stations
  • Grills
  • Heat Lamps
  • Soup Kettles
  • Beverage Dispensers
  • Coffee Station

An additional cost to add to your list is a catering van. This van will be used to transport your food and equipment to venues. You may save money initially by purchasing a used vehicle. However, you need to ensure that you know the complete history of the vehicle. You may also incur additional costs if your used vehicle needs repairs soon after purchasing it.

Some caterers also provide table settings, glassware, and utensils, but this adds to your initial investment. You may also provide additional items for your events, including chairs and/or chair covers, tablecloths, and centerpieces, but again, this will add to your startup costs.

Before starting your business, sit down and make a list of your total expenses. You can tailor the list to your own business. For example, if you don’t serve fried food, you won’t have to invest in deep fryers. If you specialize in only desserts, you may have pastry tools, cake displays and stands, and bakeware sets on your list.

Once you’ve made your list, start shopping around to get an idea of costs. Check out prices online or visit local commercial kitchen equipment and supply stores. Once you have an idea of how much funding you need, it’s a smart idea to add about 30% to those costs to prepare for the unexpected. For example, if you’ve priced everything at $100,000, apply for a loan of $130,000 to make sure all of your bases are covered.

Register Your Business

Before you begin catering to clients, you need to register your business with federal, state, and local agencies.

First, you need to think of a business name. Brainstorm ideas to find a name that’s catchy and is a reflection of your brand. When you’ve come up with a great name, check your Secretary of State’s website to ensure that this name is not already being used by another business.

Next, you will need to select your business structure. This is an important step because your business structure determines how your business is taxed and your personal liability for debts incurred by the business. The types of business structures include:

Sole Proprietorship

This business is owned and operated by one person. This is the easiest business structure and does not require registration. Setting up a sole proprietorship is easy. However, this structure does not provide you with any protection against the debts and liabilities of your business.

General Partnership

This type of legal structure is made for businesses with two or more owners. These are the easiest to create, have a low cost of operation, and the fewest requirements. No state filing is required for a general partnership.

Limited Partnership

This is another type of structure for businesses with more than one owner. General partners in a limited partnership have unlimited liability. The remaining partners – limited partners – have limited liability. In most cases, the personal assets of limited partners are protected from being used to satisfy the liabilities and debts of the business.

Limited Liability Partnership

This type of structure is designed for professional service businesses. Personal assets of any partner can’t be used to cover the debts and liabilities of the business. However, all partners in an LLP are liable for their own acts, such as medical malpractice.

Limited Liability Company

An LLC is separate from its owners. This type of legal structure protects owners from personal liability without the higher tax rates and stricter requirements of corporations.

Corporation

Owners in a corporation are protected from personal liability for the debts of the business. Corporations are the most difficult to set up. However, it is necessary to choose this business structure if you plan to sell stock or raise large amounts of capital in the future.

The type of business structure you choose for your catering business will vary based on the number of owners and your plans for the future. Consult with an accountant or attorney to learn more about your options and which is best for you.

After you choose your business structure, you will need to register with the state where you will operate. You can register through your state’s Secretary of State website. Application and fee requirements vary by state. If you plan to offer services in more than one state, you will need to register with each state.

Another important step in registering your business is obtaining an Employer Identification Number (EIN) from the IRS. This is a necessary step if your business will have employees now or in the future.

Get Permits & Licenses

After registering your business, it’s time to apply for the permits that you need to legally operate your business. It’s necessary to do this early in the game, as it may take weeks or even months to receive your required permits.

State and local laws surrounding permit and license requirements vary. Some of the permits and licenses you may need to legally operate your business include:

  • Business Licenses
  • Health Permits
  • Food-Handling Licenses
  • Liquor Licenses

You can contact the local health department, the state Alcoholic Beverage Control board, and other state and local agencies to learn more about the licenses required in your area, how to apply, and any applicable fees.

When working with food, you also face inspections from your local health department. The temperature of prepared and stored food, waste disposal, and the safety and condition of your cooking equipment are just a few of the things that will be inspected periodically.

Get Business Insurance

Protecting your catering business is important, and there’s no better way to protect yourself and your business than with business insurance. As a caterer, there are multiple insurance options to consider.

General liability insurance protects you from lawsuits that occur during events. This type of insurance covers physical injuries, property damage, and even damage to your reputation.

Another type of insurance to consider is errors and omission insurance, also known as E&O insurance. This insurance protects you from lawsuits that may be filed if a mistake is made. For example, if a client warns of an allergen and you include an ingredient that triggers an allergic reaction, this insurance would protect you from a potential lawsuit.

Property insurance should also be a consideration. This insurance protects your equipment, fixtures, and other property from damage or theft.

If you have employees, you will also need worker’s compensation insurance. This covers medical costs and lost wages from employees when they are injured or become sick. This also protects your business from lawsuits as a result of injuries.

If your business serves alcohol, you may also be required to carry liquor liability insurance, which protects your company from alcohol-related lawsuits.

Insurance requirements vary by state. Talk to your local insurance agent to find out more about the laws in your state and to create a personalized insurance policy for your new catering business.

Seek Business Funding

We’ve already reviewed many of the costs you’ll encounter when opening your own catering business. Now, it’s time to determine how to pay for those costs. Whether you have money in the bank or your bank account is looking a little slim, there are financing options available for you. Start your search with these options.

Personal Savings

If you’ve been putting away money into a savings account, now may be the perfect time to withdraw your funds. The great thing about personal savings is that you won’t take on debt with a lender. This means no payments, fees, or interest. The downside, though, is that if your business goes downhill, it may take your savings with it.

Friends & Family

Consider taking a loan from a friend or family member that’s willing to invest in a potentially lucrative new opportunity. Prepare your presentation, have your business plan in hand, and explain why your opportunity is worth investing in.

If you come to a mutual agreement, make sure to get everything in writing. It also goes without saying that this friend or family member should be treated like any other lender. That means paying back your loan as scheduled.

Instead of a loan, you may consider equity financing. In this scenario, your friend or family member would own part of your business. The major benefit is that you wouldn’t have to immediately start making loan payments. However, you would give over some ownership (and a slice of your future profits) and control over your business if you go this route. Undecided? Learn more about the pros and cons of debt vs. equity financing.

ROBS

If you have a retirement account, you may be able to leverage these funds for your new venture. Normally, if you withdraw before you reach a certain age, an early withdrawal penalty and income tax penalties apply. However, you can avoid these costs through a rollover as business startups (ROBS) plan.

A ROBS plan allows you to use your retirement funds for starting or expanding your business. Four steps are required to access your funds. First, a C-corporation is created. The next step is to create a retirement plan for the new C-corp. Then, you can roll over funds from your existing retirement account into your newly created plan. Finally, you will use these funds to purchase stock in your C-corporation, giving you access to the capital you need for your new business.

The process isn’t complicated, but there are rules you have to follow to ensure you maintain compliance. To take the guesswork out of ROBS, many aspiring business owners work with a ROBS provider. For a fee, ROBS providers will set up your ROBS account for you and will maintain it to ensure everything is done by the book.

Using your ROBS is a great way to fund startup costs. Other than a setup fee and a monthly maintenance fee charged by your ROBS provider, you do not pay additional fees. After all, you’re using your own money. However, if your business fails, you put your retirement funds at risk.

Recommended Option: Guidant Financial

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Guidant Financial can help you roll over your retirement funds into capital you can use for your catering business. In about three weeks, you can have the funds you need to start or grow your business with Guidant Financial’s ROBS plans.

To qualify, you must have a retirement account worth at least $50,000. Most retirement plans qualify, including:

  • 401(k)
  • 403(b)
  • Traditional IRA
  • TSP
  • SEP
  • Keogh

There are no credit score, time in business, or annual revenue requirements to qualify. However, you must have a business to fund, and you also must be an employee of that business in order to set up your ROBS plan.

Since you’re using your own funds, you don’t have to worry about monthly loan payments. However, you will have to pay a one-time setup fee of $4,995 followed by a maintenance fee of $139 per month to maintain your account.

In addition to ROBS plans, Guidant Financial also offers additional small business loan options including Small Business Administration loans and unsecured business loans.

Equipment Financing

As we discussed earlier, there is a lot of expensive equipment needed to start your catering business, from a catering vehicle to commercial kitchen equipment. A financing option to consider when you need new equipment is equipment financing.

With equipment financing, you can take possession of the equipment you need without paying the full cost up front. Instead, you’ll pay a down payment (typically 10% to 20% of the purchase price), then repay a lender in smaller, more affordable payments over time.

There are two main types of equipment financing to consider: equipment loans and equipment leases. With a loan, you’ll make a small down payment, then put the equipment into use immediately. You’ll make regular payments to the lender that are applied to the principal balance as well as interest and fees. Once you’ve repaid the loan as agreed, the equipment is yours to keep, sell, or trade.

The other type of equipment financing is an equipment lease. You’ll also pay a down payment and regular payments. However, at the end of your lease, you return the equipment. At this time, you can sign another lease for new equipment. This is a better option if you plan to upgrade your equipment frequently, although this option can be more expensive over the long term.

With equipment financing, you typically do not have to put up collateral. Instead, the equipment being financed is the collateral and can be seized by the lender if you don’t make your payments as agreed.

Recommended Option: Lendio

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Lendio’s network of over 75 lenders can provide you with up to $5 million to finance your equipment. Loan terms are between 1 to 5 years with rates starting at 7.5% for the most qualified borrowers. With some lenders, you can get your funding in as little as 24 hours. Some applicants may even qualify for 0% down financing.

To qualify for equipment financing, you must meet the following requirements:

  • At least $50,000 in annual revenue
  • Personal credit score of 650 or above
  • Time in business of at least 12 months

If you have credit challenges, you may still qualify provided you have proof of solid cash flow and revenue for at least 3 months.

The funds can be used to purchase the equipment you need for your catering business, including but not limited to commercial kitchen equipment, office furniture and fixtures, software, appliances, and commercial vehicles.

If you don’t qualify for equipment financing through Lendio’s network, you can shop around for other financing options. Through Lendio, you can apply for financial products including SBA loans, business credit cards, lines of credit, and startup loans.

Lines Of Credit

Running your own catering business comes with its challenges. Some challenges are expected — rushing around to cater a big wedding, for example — while others come when you least expect it. Whether it’s a slow season that has impacted your incoming cash flow, equipment that needs repairs, or an unforeseen emergency, even the most successful business face the unexpected.

For these times, it’s great to have a backup plan, like a flexible line of credit. A line of credit is different from a traditional loan because you don’t receive one lump sum that you immediately start repaying. Instead, a lender assigns you a credit limit — much like a credit card — and you can withdraw money from your line as needed.

Your line of credit is ready to use whenever you need it. You don’t have to immediately draw funds if there’s no need, and most lenders don’t charge fees if you don’t use your line of credit. When you do use your line of credit, you’ll repay your balance plus any fees and interest charged by the lender. Since this is a revolving form of credit, funds will be replenished and available to use again as you pay off your balance.

Recommended Option: Fundbox

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Fundbox offers lines of credit that can be used for any business purpose. One of the standout features of Fundbox is that the lender looks at the performance of your business — not just your credit score. Even if you’ve been turned down by other lenders in the past, you may still qualify for a Fundbox line of credit.

Through Fundbox, you may qualify for up to $100,000. Once approved, you can immediately make draws on your account. Repayment terms are 12 or 24 weeks, and rates start at just 4.66% of the draw amount. Weekly repayments are automatically deducted from your business checking account. There are no prepayment penalties, all remaining fees are waived if you pay off early, and there are never any fees if you don’t make a draw.

To qualify, you must meet the following minimum requirements:

  • At least $50,000 in annual revenue
  • Holder of a business checking account
  • At least 2 months of activity in accounting software OR at least 3 months of transactions in a business bank account

Business Credit Card

Another source of financing that’s great for covering unexpected expenses is a business credit card. A business credit card works just like your personal card. You can use your card online and in stores to make purchases anywhere credit cards are accepted. When you use your card, the lender charges interest on the borrowed portion of funds. If you don’t use your card, you aren’t required to pay interest. However, annual fees and other charges may apply.

Business credit cards are great for emergencies or for quickly resolving cash flow issues. You can also use your credit card for recurring expenses, such as gas for your catering van. If you go this route, apply for a low-interest rewards card that gives you cash back or other perks just for using your card.

Recommended Option: Chase Ink Business Cash

Chase Ink Business Cash



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Annual Fee:


$0

 

Purchase APR:


15.49% – 21.49%, Variable

With Chase Ink Business Cash, you can earn rewards just for using your card to pay for your business expenses. Using this card gets you 5% cash back on the first $25,000 spent at office supply stores and on internet, cable, and phone services. You can earn 2% cash back on the first $25,000 used at gas stations and restaurants. These offers renew each year on your account anniversary. For all other purchases, you can earn unlimited 1% cash back.

New cardmembers can take advantage of a $500 cash back bonus offer when $3,000 is spent within 3 months of opening an account. This card also comes with additional benefits including purchase protection, extended warranty protection, and free employee cards.

There is no annual fee for the Ink Business Cash credit card, and it comes with a 0% introductory APR for the first 12 months. After the introductory period, the card has a variable APR of 15.49% to 21.49%.

This card is recommended for borrowers with good to excellent credit scores.

Vendor Financing

As a caterer, you’ll establish relationships with vendors. You’ll purchase your ingredients, supplies, and other necessary items from these vendors. Many times, you’ll purchase these items up front. Other times, however, you may need a little help in the form of vendor financing.

With vendor financing, a lender will pay your vendors up front so you can get the supplies necessary for running your business. You’ll then be able to spread your purchase out over several smaller payments. Like other financial products, you’ll pay fees and/or interest for the convenience. While the cost of borrowing may be higher than making a purchase up front, the extra expense may be well worth the cost if you’re in a financial bind.

Recommended Option: Behalf

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You can pay your vendors immediately without putting up the money up front by working with Behalf. Through Behalf, you can get up to $50,000 to pay your vendors. Then, you have up to 6 months to repay the lender.

Monthly fees start at 1% of the borrowing amount and are based on your creditworthiness. There are no origination fees, membership fees, or other hidden costs to borrow from Behalf.

There are no time in business, annual revenue, or credit score requirements to qualify. However, Behalf will perform a hard pull on your credit once you submit your application.

Personal Loans For Business

You have a solid credit score, but small business lenders won’t even give you a second glance. What gives?

Many small business loans have time in business and annual revenue requirements. This is fine when your business is already operating, but what do you do when you need a loan before you even open your doors? Try applying for a personal loan for business.

As a startup, you may find it challenging to qualify for a small business loan. However, you can use your own personal credit score and income to qualify for a personal loan that is used for business expenses.

These loans don’t have time in business, annual revenue, or business credit score requirements, so you can qualify even if you’ve not yet catered a single event. Personal loans are available for a wide range of credit scores. However, having a high credit score can help you qualify for the best interest rates and terms.

Recommended Option: LendingPoint

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LendingPoint specializes in personal loans, offering qualified borrowers $2,000 to $25,000. Rates range from 9.99% to 35.99% with repayment terms of 24 to 48 months. An origination fee of 0% to 6% of the borrowing amount may apply. Payments are made twice per month.

You can quickly and easily qualify for a LendingPoint personal loan. To receive an offer in just minutes, you need:

  • Proof of employment & income
  • Bank statements
  • Voided check
  • Driver’s license or government-issued ID

To qualify for a loan, you must:

  • Be at least 18 years old
  • Have a social security number
  • Have at least $20,000 in annual income
  • Have a verifiable bank account
  • Live in a state serviced by LendingPoint
  • Have a credit score of at least 585

Choose The Right Software

pos with raw ingredient tracking

From keeping track of events to accepting credit cards, the right software can help you do it all. As a caterer, there are several types of software you should consider investing in to keep operations running efficiently.

Accounting Software

This software allows you to perform functions such as tracking expenses, sending invoices to clients, managing payroll, and keeping up with inventory. With accounting software, you can keep up with your financials and run reports, which is especially helpful when you’re seeking financing from a bank or traditional lender. Accounting software also makes it easier for your business when tax time rolls around.

New to accounting? Download our free eBook, The Beginner’s Guide to Accounting.

Catering Software

There are specific software programs designed to help caterers manage all aspects of their businesses. Features include invoicing, billing, employee scheduling, event bookings, and other tools to keep your catering business on track.

Payment Processing Software

Not all of your clients will have cash, especially when they’re paying off large bills for their catering expenses. To make payments easier for your clients, invest in payment processing software. This software acts as the communicator between your bank and your customer’s bank, allowing you to accept debit cards, credit cards, and other methods of payment. Most payment processing software comes with monthly subscription fees, and some companies even offer free hardware that makes it easier than ever to accept multiple forms of payment.

Hire Employees

When you first start your business, you may be a one-man operation until you start bringing in revenue. However, you will eventually need to hire employees if you want to grow and scale. If you’re like many caterers, you may opt to hire an employee or two right from the start.

Employees that you may hire for your business — either now or in the future — include:

  • Chef: Your chef will be in charge of preparing the food. For large events, consider hiring sou chefs for additional assistance.
  • Servers: Bring food and drinks to guests
  • Bartenders: Serve alcoholic beverages to guests
  • Busboys: Responsible for clearing off tables
  • Host/Hostess: Help guests find their seats
  • Event Planner: Meets with the client to discuss details about the event
  • Supervisor: Ensures that other staff members are doing their jobs efficiently

Until your business grows and brings in revenue, you may opt to hire just a few staff members, such as a chef and a server. As your business gains more customers and becomes profitable, you can add additional employees to your staff.

Do your research to get an idea of the average pay range in your area for each position. It’s also important to remember that other expenses come with hiring staff, including workman’s compensation insurance, training costs, and benefits.

To find employees for your business, ask friends, family members, and colleagues for referrals. You may also post a job advertisement on online job boards. You can even contact local temporary agencies to find the help you need.

Bolster Your Web Presence

Your plans for a catering business are coming together, so now it’s time to start thinking about how you’re going to bring in clients. There’s no better place to start than the internet.

Just think about it. If you’re looking for a local company to work with, where is one of the first places you look? The internet, of course.

You can quickly build your web presence with these easy steps.

Launch Your Social Media Profiles

Social media is a great way to reach new customers, and best of all, setting up your profiles is free! Create business pages on Facebook, Twitter, Instagram, and/or Pinterest. Make sure to include critical details such as your contact information, service areas, and types of events catered. You can build up your profiles to include information such as menus, pricing lists, and photos of your food and past events.

An added bonus on social media is that you can communicate with potential customers through comments or direct messaging.

As you begin to grow your business, you can later invest in social media ads, but in the beginning, focus on getting your profiles up and running.

Want to get the most out of your social media profiles? Check out our Guide to Social Media Marketing.

Build Your Website

In addition to your social media profiles, you also need to build a website. This doesn’t have to be overly complicated. In fact, there are lots of website builders that make it easy to choose a template, customize your font and colors, and drag and drop images, text boxes, and tools — no design experience required.

Make sure that the design of your website reflects your branding. You also want to include important details, including the name of your business and contact details. You can also add additional features and information, including a live chat option, photo galleries, and reviews and testimonials.

Advertise Your Business

Boosting your web presence is a great start to advertising your business, but make sure that you don’t stop there. There are several ways that you can advertise your business — both online and off.

Fliers

Pass out or hang flyers advertising your catering services throughout your area. Make sure that you understand the regulations in your area surrounding posting and/or distributing flyers.

Online Ads

Purchase ad space on Facebook, pay-per-click ads on search engines, or even post advertisements on local online forums and social media groups.

Newspaper Ads

This is an oldie but goodie: pay for ad space in your local newspaper.

Attend Wedding Shows

Many cities and towns have bridal shows where vendors can advertise their services. Research events in your area, rent booth space, and advertise your business in-person to newly engaged couples.

Wedding & Event Websites

Submit your business information to wedding and event websites to draw in new customers.

Word-Of-Mouth

Word-of-mouth advertising is the best form of advertising. Ask your past customers for testimonials and reviews, and always make sure to go above and beyond to provide exceptional service.

Final Thoughts

Starting your own catering business is exciting but venturing out on your own can also be a little scary, especially if you lack business experience. However, you can be on track to owning and operating a successful catering business with careful planning, preparation, and strategic borrowing. Good luck!

The post How To Start And Fund A Catering Business: The Step-By-Step Guide appeared first on Merchant Maverick.

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CoverWallet Review

CoverWallet Review

CoverWallet is an online platform that sells business insurance through its agency partners and helps keep all your policy information in one cloud-based location. The company prides itself on making business insurance purchasing simple for business owners.

Started in late 2015 by two start-up entrepreneurs based in New York, CoverWallet began as a way to create a seamless, easy to understand, and comprehensive website for business owners looking for commercial insurance. Now, the company partners with carriers for 30 different types of business insurance. The CoverWallet platform is a self-described “concierge” service that helps business owners understand what insurance they need, offers quotes, and provides a platform for businesses to manage their policies, claims, and payments all in one place.

CoverWallet’s online platform is very easy to use and intuitive. It’s designed with business owners in mind and is great for comparison shopping. The service is ideal for busy business owners or new business owners needing a quick way to compare the best business insurance options for their company. However, some policyholders express frustration with slow communication once a policy is purchased and a glacial response to sending out certificates. Instant free quotes aren’t always instant either and can take 1-2 business days depending on the level of business information required.

If you are a business owner looking to make a decision on business insurance, read further to see if CoverWallet might be a good fit for you.

Pros

  • Easy to use
  • Good support materials
  • Free quotes available
  • Comparison shops across a wide field of insurers
  • Keeps all policies organized in one location

Cons

  • Slow customer support
  • Quotes don’t always generate instantly

Services Offered

CoverWallet itself does not consider itself an insurance company. Rather, it is a tech company with resources to help the insurance industry — a business insurance aggregator if you will.

Its carrier companies are Liberty Mutual, CNA, AMTrust, Berkshire Hathaway, Progressive, Hiscox, Chubb, and others. Once a business owner chooses a policy with one (or multiple) of these carrier companies, CoverWallet provides an online platform to store all of your policies and payments in a single location.

CoverWallet matches employees with insurance providers offering 30 different types of insurance. Here are some of the main types of business insurance offered by CoverWallet’s carriers:

  • General Liability
  • Workers compensation
  • Business owner policy
  • Commercial property
  • Professional liability
  • Commercial automobile
  • Umbrella insurance
  • Product liability
  • Directors & officers
  • Business interruption insurance
  • Liquor liability
  • Medical malpractice

Visit CoverWallet’s website for a comprehensive list of insurance types.

Pricing & Purchasing Process

The cost of business insurance varies widely depending on all your business specifics. CoverWallet makes comparison shopping and shopping for industry-specific insurance very easy and user-friendly. How much money you make in a year, how many employees you have, your payroll information, your location, and what you sell all impact insurance premiums.

CoverWallet is not an insurance provider but it will match you with an insurance carrier. To receive a free quote from CoverWallet, business owners can select which type of business insurance policy they are looking for and will be asked to provide some basic business information, such as:

  • History of business earnings and losses
  • How long you’ve been in business
  • The type of employees you have
  • Your business assets
  • Details about your specific business industry
  • Tax filing information

CoverWallet may ask for your social security number and federal tax ID numbers. Once you’ve provided this information, CoverWallet will send you a quote from compatible carriers and a CoverWallet agent will reach out to you to go over the quotes. If CoverWallet did not receive enough business information to generate a quote, an agent will call you and ask for the necessary information. This process can take 1-2 business days.

If you’d like to skip the online portion entirely you can call CoverWallet directly and speak to an agent on the phone to receive a quote as well.

Specific Size of Business

Companies of all shapes and sizes with varying insurance needs could all use an interface like CoverWallet to assist with their insurance and compliance needs. CoverWallet is ideal for small business owners who want to save money by comparing insurance policies from multiple carriers. Larger businesses, or small business with multiple policies, can also benefit from having all of their insurance information centrally located on the CoverWallet platform. You can add multiple users to your online CoverWallet account if needed.

Features & Benefits

CoverWallet Review

CoverWallet helps small business owners control their insurance needs in one central location. Here are some of the features the company offers:

  • My CoverWallet Dashboard: When you become a client of CoverWallet, you receive a My CoverWallet account that keeps all of your policies in one place. You can access information, view policies, file claims, and make payments all from the My CoverWallet interface.
  • Certificates & Third-Party Compliance: You are a small business and you need to prove you are insured by submitting certificates or you are working with other vendors and are requesting for them to submit proof of compliance? CoverWallet will store all of that information in one spot on your account.
  • Claim Filing Support: CoverWallet was designed to be a one-stop shop for business owners. So, customers can file claims directly from their My CoverWallet dashboard. CoverWallet says that they can walk customers through filing a claim step by step, if needed.

Customer Service & Support

There are many opportunities to connect with CoverWallet employees. At various sections of the website, you are directed to speak to real representatives either through email, phone, or chat. The chat feature enables users to talk to people during the company’s hours (chats sent after 6 PM EST will be answered the next business day). One of the helpful features is the ability to schedule a time for a CoverWallet representative to call you back if you are not able to talk to someone on the phone at that moment. Users appreciate the support resources available, but there are some complaints about slow response times and poor support communication.

Negative Reviews & Testimonials

Many CoverWallet reviews end up being about individual insurance carriers rather than about CoverWallet as a company. For CoverWallet specifically, according to the consumer website eKomi, out of 448 total reviews, 91.74% were positive and 6.47% were negative (with the difference in neutral reviews). Out of the 6.47% of negative experiences, the biggest complaints were the following:

  • Poor Customer Support: Some of the insurance companies and agents brokering deals with CoverWallet are not as knowledgable as others. Some customers experience slow response times from agents after the initial purchase.
  • Difficulties Adding Coverage: Users say adding additional coverage is cumbersome.
  • Poor Communication: The communication between the various moving parts (the CoverWallet representative and the agents from individual agencies) is not seamless and can be frustrating for busy business owners to navigate.

Positive Reviews & Testimonials

The Better Business Bureau gives CoverWallet an A- rating on its website. The positive reviews for CoverWallet are in the majority, with most people experiencing a seamless insurance experience. The biggest customer praise says:

  • Quick & Easy To Use: The platform is easy to use and easy to understand. Businesses in a time-crunch to show compliances can be up and running with coverage in less than a day.
  • Easy To Compare The Best Deals: Users enjoy how easy it is to compare insurance policies across multiple providers.
  • Good Support Materials: Despite the issues some users had with slow customer response time, users appreciate that access to CoverWallet agents and employees is easy with chat, calling, and email options. Many agents go above and beyond to secure the best insurance rates for your company and your industry. They are not happy unless you are happy.
  • Competitive Pricing: No brokers fees! This is a big plus for users as well as free quotes.

Company Reputation & Reliability

CoverWallet receives widespread praise for their user-friendly interface and their goal to make business insurance a streamlined process. The start-up is new and evolving. They currently launched a platform that adds more agents and insurance options to their customers by building a bigger bridge between providers and business owners. While the business might be expanding and learning, early feedback about the services CoverWallet provides is solid.

Final Verdict

If you are a small business owner who needs to insure yourself and your employees quickly — and you have no idea where to start — CoverWallet is a great fit.

The company is ideal for business owners who want to compare various insurance policies to get the best deal and want a single location to manage all of their policies and insurance information. Because of the company’s many support resources, using CoverWallet is easy no matter what level of knowledge you have regarding business insurance.

There are some complaints from users about slow response times as well as complaints about specific insurance providers. Additionally, the free “instant” quote isn’t always instant and can take up to 1-2 days to be completed. Despite these drawbacks, overall customer reviews rank CoverWallet favorably and highlight the easy interface as a major bonus.

Research what types of insurance you might need and then add CoverWallet to your list of places to check for comparison costs and quotes when you are ready to start the insurance buying process.

The post CoverWallet Review appeared first on Merchant Maverick.

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How To Get Business Insurance In 4 Easy Steps

How To Get Business Insurance in 4 Easy Steps

You’ve already asked the question, “Do I need business insurance?” And the answer was an enthusiastic, “Why yes! Yes, I do!”

So…what do you do next?

Small business insurance is an important cost of doing business but obtaining coverage doesn’t have to be an overwhelming process. Once you know the reasons behind your need to purchase business insurance (a legal requirement or a desire to protect your assets), you can set out to protect your business and the people you employ with confidence. With the plethora of online one-stop insurance shops at your fingertips, it is possible to get business insurance from a reputable company in as little as thirty minutes. (That’s not a guarantee for Luddites, people with slow internet connections, or my mom.)

If you are a small business owner and are starting to look at your business insurance options, we are here to help. Follow the next 4 steps and you’ll be well on your way to buying appropriate insurance coverage!

Step One: Assess Your Risks & Choose The Insurance You Need

Whether you do the research online or meet with an insurance expert, the first thing you’ll need to decide is what type of business insurance you are in the market for. Give some thought, not only to your legal requirements, but also to the specific risks your company might face. Are you located in an area with increased fire risk (California) or flooding after hurricanes (Florida)? Are you in a state that is considered small business or consumer friendly? Do you work with vendors and want to insure your partnerships? Knowing what you need is more than half the battle.

Sit down with a list of insurance types and research whether your business could benefit from different kinds of coverage. Once you’ve done your due diligence, you are ready for step two.

Here is a list of some of the most common types of business insurance to get you started:

Type of Insurance What It Covers Who It Is For

General Liability

Protects your business from the threat of a lawsuit

All businesses

Property Insurance

Protects your building and things inside your buildings from damage and accidents

Businesses with a physical property site and products located in those physical locations

Business Interruption

Provides resources if your business is forced to stop or relocate

Businesses located in riskier areas and businesses who might work with vendors in risky areas

Commercial Auto Insurance

Provides protection from accidents on your commercial vehicles

Businesses that rely on automobiles to do business

Workers Compensation

Provides protection to you and your employees should they become injured on the job

All businesses

Professional Liability (E&O)

Protects your business during a lawsuit if your business commits errors or malpractices

Any business that provides a service

Product Liability Insurance

Protects a business from a lawsuit related specifically to the product it sells

Any business that manufactures, sells, or distributes a product

Home-Based Business Insurance

Protects any business-related items inside your home not covered by home owner’s insurance

Any business owners running out of their own homes

Business Owners Policy

Includes both general liability and commercial property insurance

All businesses

Umbrella Insurance

Provides a bigger ceiling for the legal costs of a lawsuit that extends your liability coverage

All businesses

Step Two: Gather Business Information

In order to receive an accurate policy quote from an insurance company or a comparison site, you will need to come prepared with some information about your business. Insurance is a numbers game and the company you work with will need your business numbers to accurately gauge your riskiness. So, gather the information before you shop. Depending on the policies you are buying, you may need to provide quite a few details about your business. The most basic questions are:

  • Where are you located?
  • How many employees do you have?
  • What is your payroll?
  • How much does your business make?

If you need to insure specific equipment, property, or vehicles, bring information about those assets. The more prepared you are, the better.

Step Three: Comparison Shop

Now that you have all the numbers and pertinent information at your fingertips, it’s time to shop around and find the best fit for you and your business. A few sites, including Insureon, CoverWallet, and Coverhound, will comparison shop for you and show you the best policies for your business. Some commercial business insurance companies also offer online quotes and rates.

If you have larger or more complicated assets or many moving parts to your business, sitting down with an insurance specialist is the way to go.

Step Four: Purchase!

You know what you want, you’ve found the best price, and now the only thing left to do is purchase your policy.

Done and done. Pay those premiums and protect your business!

Frequently Asked Questions

What Insurance Does A Small Business Need?

What kind of insurance you may need is entirely dependent on the business you run. The bigger your company or the more assets you are protecting, the more insurance you might need. If you have a physical storefront — or even if you are in the business of giving advice (people are pretty litigious if they think they received bad advice) –, protect yourself. It would be devastating to shutter your business because of an accident or mistake that could have easily been protected by investing just pennies of your profit.

How Much Is Insurance For A Small Business?

According to Insureon, an insurance provider that specializes in commercial businesses, the average cost for business insurance among their customers in 2017 was $1,281 per year and the median cost was $584. For a more detailed response, check out our article How Much Does Business Insurance Cost?

Do You Need Insurance For An LLC?

While classifying your business as a Limited Liability Corporation (LLC) might protect your personal assets in the event of a lawsuit, it still doesn’t prevent your business from lawsuits in general. One lawsuit can eat up all of your profits and close your business for good.

Is It A Legal Requirement To Have Business Insurance?

If you have employees, there are a few legal requirements. Employment laws and insurance laws vary by state, so research what your state requires of you. In general, if you have one employee you will need to provide workers’ compensation, disability, and unemployment insurance. Also, even though it is not a government requirement, some clients and partners or landlords will require proof of insurance.

How Much Is Small Business Insurance Per Month?

The monthly cost will vary depending on what type of insurance you purchase, how large your company is, and how many policies you have. However, a sole proprietor looking for one-million dollars in liability coverage may pay as little as $30 a month.

Ready, Set, Go!

It really is that easy. Research what you need and want, gather your information, comparison shop, and purchase. With so many online retailers, it is easy to grab a quote and play around with cost factors. And, as usual, it is best to talk with an insurance expert that is familiar with your industry to help you think about risks and opportunities for protection that may have slipped your radar.

Insurance is about peace of mind, and it’s also about valuing the work you’ve put into your business enough to not let an accident, a lawsuit, or an Act of God tear it all down. Follow these four easy steps to get small business insurance, and you can sleep and rest easier.

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Do I Need Business Insurance?

Do I Need Business Insurance?

Insurance isn’t a fun purchase. In terms of your small business, it’s far more enjoyable to order business cards, design window decals, work on a marketing plan, and think about how to make your product the best you can. Some business owners push off business insurance because they can’t help asking: “Is this really necessary? Can I afford this extra expense for things that may or may not happen?”

The real question is: Can you afford not to insure your business? The commercial insurance company Insureon completed a study and discovered that only one in four businesses have adequate business insurance and 80% of businesses cannot recover after a disaster. With that in mind, business insurance is a small cost to pay to keep yourself safeguarded from financial ruin.

Do I Need Business Insurance?

The insurance industry is in the business of doom and gloom and disasters. They see your cute storefront located right in the middle of flood territory and say, “Hey, business owner. Let’s imagine that river floods and you can’t open your shop and you lose sixty-percent of your inventory and now you can’t pay your employees and…”

And now you’re in the fetal position wondering if anything in life is worth the risk. Except, it doesn’t have to be like that. Unless you are a thrill seeker who likes to live dangerously, eschewing all ethical responsibilities to others, consider business insurance part of the cost of doing business.

What Is Business Insurance?

Business insurance protects you and your assets from disasters, accidents, lawsuits, theft of property, data breaches, and even mundane hassles like clogged drains. Commercial insurance plans are tailored specifically to your industry and your specific risks. Many factors affect insurance costs, including business location, number of employees, and risky behavior. For example, if you run the ax-throwing brewery near my house (this is a real thing) and want to put sharp objects in the hands of people also drinking beer, get yourself some insurance, people! (I’m confident they are well-insured. And I am also confident I will visit.)

Are You Legally Required To Have Business Insurance?

If you are a sole proprietor of your business and don’t have any employees or customers (see ax-throwing reference above) to protect, business insurance might legally be optional. However, the rules are often state specific, so it’s important to talk to a business lawyer or state insurance representative to make sure you are compliant with state requirements.

However, the government requires businesses with more than one employee to provide worker’s compensation, unemployment, and disability insurance. If you have employees driving business vehicles, you will also need commercial auto insurance, and some landlords and leaseholders require renter’s insurance or commercial property insurance as part of a rental agreement.

Another legal requirement might be health insurance. If you have fifty or more employees six months or more out of the year, then you are legally required by the federal government to provide health insurance. If you aren’t required legally to provide health insurance and you do anyway, then you’re eligible for a tax break.

Reasons You Should Have Business Insurance

How To Get Business Insurance in 4 Easy Steps

Business owners might wonder why they should invest in protecting their business and assets. Here are some important reasons to consider as you weigh your insurance needs:

It Fulfills A Legal Requirement

If you have more than one employee, you need to provide worker’s compensation, disability, and unemployment insurance. Also, your landlord may legally require you to hold renter’s insurance. (These requirements are state specific, so check your state’s legal requirements.)

People Like To Sue Other People

Humans are litigious and sue-happy. No matter what business you start, there is the potential for someone, at some point, to become unhappy with the business or your product and engage you in a lawsuit. Handling a lawsuit without liability insurance could be disastrous to any small business — even if the business is eventually found not liable. (And, yup, if you aren’t fully covered, the plaintiff could come after your personal assets.) A lawsuit is costly and stressful. And insurance is more affordable than you might think — a sole proprietor of a business who wants one million dollars in liability coverage could pay as little as $30 a month for peace of mind.

Protects Your Business In The Event Of A Disaster

The word disaster in this scenario could be anything from an Act of God, a fire, theft or vandalism, or anything else that has the potential to stop your business from running smoothly or running altogether. A business owner’s policy that provides a package of general liability and commercial property insurance will protect from the most common disasters.

Protects The Humans You Employ

Insurance isn’t just doom and gloom. Offering insurance protection to your employees creates a positive work environment and sends the message that you care about the people working for you. While you may have to provide basic protections like worker’s compensation, disability, and unemployment, you can also offer health insurance (and if you aren’t legally required to provide it, you can receive a tax break for doing so) and life insurance policies to help attract and retain quality workers.

Provides Tax Breaks

Business insurance is a tax write-off and you can claim your premiums as deductions. (Except, funny tip: if you are a beneficiary for one of your employee’s life insurance policies, you can’t deduct that insurance policy…so, since tax laws become oddly specific, it’s important to check with a tax expert for your state.)

Contracts May Require Proof Of Insurance

If you want to borrow money for your business, the bank may require you to prove your business is insured. Also, if you work with clients or other businesses as independent contractors, they may also require proof of insurance before choosing to work with you. Insurance doesn’t just provide peace of mind for the business owner but also for the people who engage in the business.

What Type Of Business Insurance Do You Need?

Okay, you’ve made the wise choice to insure your business. Now you’ll need to research which policies are the best fit for your business model. Businesses in riskier industries will need more insurance, but there are options for all types of business owners, from sole proprietors to corporations. The most basic types of insurance types are:

  • General Liability Insurance: General liability protects your business in the event of a disaster, lawsuit, or accident. Claims against a business can arrive in the form of bodily injury, property damage, personal injury to a customer (including slander or libel), or false advertisement.
  • Commercial Property Insurance: A commercial policy insures your building, business products inside your building, and other people’s property while it’s in your care. Property damage due to theft also falls into this category.
  • Professional Liability Insurance: Also referred to as E&O insurance, this is additional liability insurance that helps cover your business from professional liability of either errors (where your business caused a financial loss for a client) or omissions (an employee didn’t do his/her job as required).
  • Worker’s Compensation Insurance: If an employee is injured at work, this will protect your employee and you if a lawsuit should arise. This is a requirement for businesses with more than one employee.
  • Commercial Auto Insurance: If your business involves a fleet of vehicles or if an automobile is needed, you will want to cover those vehicles under a commercial insurance plan.
  • Business Owner’s Policy: This is a policy offered by most insurance companies; it includes both general liability and commercial property protection.
  • Renter’s Insurance: This might be a requirement if you are renting/leasing business space. This protects your location from damage and liabilities for that damage.
  • Business Interruption Insurance: If something stops your business from functioning (a flood, an Act of God, or an illness or other accident), this insurance will help pay for lost income incurred during the interruption. This insurance specifically covers income and profits and covering the cost of getting your business back up and running.

Industry Specific Insurance

The type of insurance your business needs is directly correlated to the type of business you run. Again, if you are running an ax-throwing business and putting beer in those customers’ hands, you will need a larger liability package than say someone who is working as a freelance writer (loss of limbs versus paper cuts, possibly?) and so knowing what kind of insurance might be specific to your industry is important.

Insurance For Retail

In addition to the basic coverage types mentioned above, there are a few other insurance policies that are specifically for small business retail owners. Franchise upgrade insurance, for example, helps a franchise pay for the cost of an upgrade required by your franchise agreement. Also, if your retail store is dependent on other businesses to provide you supplies, then you can request business income from dependent properties insurance which pays you out if your business is harmed due a business interruption from someone you work with.

Insurance For Restaurants

If you serve alcohol in your establishment, then liquor liability insurance is an important policy that specifically protects you from the damages caused by someone drinking too much in your establishment or even starting an alcohol-induced fight. Any lawsuits, costs, or damages that arise from serving liquor can be covered by that policy. Another restaurant industry-specific policy is a temperature change policy. If you lose power and your refrigeration unit shuts down (or breaks) and you have spoiled food, a temperature change policy will cover the cost to replace any lost product.  

Insurance For The Self-Employed

If you are self-employed, you might have many concerns about how your business might impact your quality of life. Renter’s insurance and/or homeowner’s insurance will protect the items in your business should your house suffer an accident or disaster (flood, fire, theft). It’s important to check with your insurance company to see if your homeowner’s insurance protects businesses run within the home, and if it doesn’t, then discuss an add-on liability package to cover your business. 

Insurance For Professional Services

If you run a professional service (legal, accounting, consulting, engineering), several types of insurance options might make sense for your business. The first is director & officers insurance (D&O) which protects the individual directors and board members in your business from lawsuits claiming their decisions had a direct financial impact on the plaintiff. While D&O insurance is mostly for larger corporations, small businesses and even non-profits are starting to see the importance of adding a D&O policy. Your managers could make a mistake and be personally liable for that mistake; this policy protects them and the company from the cost of lawsuits targeting a specific individual’s actions.

There are a few other policies that might be worthwhile. If you are a firm that runs a cloud-based storage system for clients and the cloud goes down, you could have a policy to protect yourself from damages related to lost files. And if you have physical files stored somewhere and they are ruined by wind, rain, fire, valuable papers and records coverage will cover the cost to replace and reproduce documents.    

Insurance For Technology

Today, most companies should absolutely prepare for a data breach if they collect sensitive information like social security or credit card numbers. Data breach coverage pays for costs that incur because of the loss of information, including notifying impacted clients, advertising the data breach to get the word out, and paying the cost of PR firm to help navigate the media. If personal information is lost or stolen from your technology business, you have legal requirements to follow in the aftermath and having data breach coverage will help you follow the law.

Insurance For Manufacturing & Wholesale

Product liability is a needed coverage to add to your general liability package that products your company in the event that someone sues you because of injuries or damage caused by your product. If you manufacture goods, product liability is a smart bet to protect against any litigation that comes your way. (Weird and true lawsuit fun fact: The widow of the murderer in the 1984 San Diego McDonald’s massacre sued McDonald’s saying their product, fast food, caused her husband to go into their establishment and kill 21 people. She lost.) Protect yourself now and worry about all the weird ways people might sue you over your product later.  

Insurance For Real Estate

Employees practices liability coverage protects your real estate agency from claims of discrimination, breach of contract, harassment, wrongful termination, among other employee-related lawsuits. It covers your defense and legal costs related to a claim, but it won’t cover any punitive damages that may occur as a result. (Damages are usually covered in a general liability policy.) 

Insurance For Construction

Construction jobs are risky and involve many moving parts. Sometimes a construction business has a physical store location in addition to a traveling business of workers in and out of other people’s homes. A specific brand of liability insurance specially designed for construction businesses will protect your business when things do go wrong. Construction insurance covers claims related to any part of your construction business, including medical and faulty workmanship.

Insurance For Personal Care Services

Do you run a hair salon? Does extra hair clog your drains? Well, there’s insurance to cover that. Back up of sewers and drains coverage is designed to cover all claims related to flooding caused by a sewer drain (no matter the reason it floods). Or computers and media coverage helps insure the technology needed to run your small business.

How Much Does Business Insurance Cost?

The cost of business insurance will vary depending on all your individual business factors. Are you a home-based business or do you have a storefront? Do you have employees or are you working solo? What are the risks involved with running your business (see: ax-throwing brewery) and do you have a product to protect? Business insurance might not be a fun expense, but it’s necessary to be one of the 20% of businesses that will survive a disaster.

While the average cost will vary depending on the industry requirements, for a business owner looking for a basic business owner’s policy for a small business, the average yearly premium is $1200. However, policies can start as low as $300.

Meet with an insurance expert to assess your individual needs and discuss the ways you can protect the business you love.

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How Much Does Business Insurance Cost?

How Much Does Business Insurance Cost?

Somewhere in that endless list of things-to-do and boxes to check, a small business owner needs to think about business insurance.

It might be easier to convince yourself that you’ll figure out insurance later or that maybe you won’t need it, but all businesses have risks and make mistakes. Business insurance should be a priority.

A quick search for business insurance on the internet might, however, create more questions than answers. What kind of insurance do you need, anyway? What is a reasonable amount to pay for coverage, and what is the average business similar to yours paying? Can you save money by buying different kinds of coverage from the same company?

It’s normal to feel overwhelmed about how much things will cost, but since business insurance is a must (and possibly even a legal requirement) for your small business, we will breakdown how much you can expect to spend to protect the business you love.

How Much Does Business Insurance Cost?

“So, how much will all this cost me?”

There is no pat answer that tells business owners how much they might spend to fully cover their business. The factors and choices can seem endless. Are you buying a business owner’s policy or opting only for worker’s compensation? Do you have a risky endeavor that might need a high ceiling on your general liability and professional liability? Would adding umbrella insurance help you sleep at night? What do you actually need and what is simply a scare-tactic up-sale from an industry that peddles you worst-case-scenarios?

In general, a larger business with more options for risk will end up paying more than a sole proprietor, but that doesn’t mean that insuring your business has to break your budget, either.

Average Cost of Business Insurance

merchant cash advance industry

According to Insureon, an insurance provider that specializes in commercial businesses, the average cost for business insurance among their customers in 2017 was $1,281 per year and the median cost was $584. (In this case, nearly 60% of the businesses inventoried only had one employee: the owner!)

However, with a plethora of individual factors involved, the pricing scale differs widely between businesses, their needs, their risks, and how much they will cost to insure. An automotive insurance adjuster takes everything about a driver and his/her car into account before calculating the cost to the insurance company, and business insurance operates the same way. If you’re a reckless driver with some tickets under your belt, that price tag for insurance is going to increase. If you’re running a risky business (resisting…Tom….Cruise…joke), expect the same.

A sole proprietor looking for a single general liability policy with a million dollars in coverage might only pay as little as $30 a month.

How Business Insurance Costs Are Calculated

If we take the time to peek behind the curtain and examine how costs are calculated, it can demystify the process and give business owners an idea of what to expect before they get a quote from their insurance company.

First, think about your small business and your industry’s potential risks and liabilities. How much risk is involved with all the facets of your business? Riskier, larger, and more profitable companies will require more comprehensive protection and will therefore pay more.

Your own insurance calculations will be completed by an actuary from an insurance company who will explore your space, your product, your financial numbers, and assess your own particular risk and loss. (Are you a paper company located within a high forest fire hazard zone? A glass company on an earthquake fault line? A pool builder in the middle of a drought? Okay, okay, you get the idea.)

After the actuary looks at the risk and loss, the size and revenue from your company will factor into the ultimate decision. When you ask for a quote, you will need to provide the actuary an ample amount of data with all your business numbers (square footage of space, payroll details, etc.), so arrive prepared.

Business Insurance Cost Factors

When the actuary (someone whose sole job is to manage risk and assess risk) arrives from the insurance company to sit down and plug all your risks, losses, and opportunities for income into the calculator, many factors can ultimately impact that final number. Knowing which factors might affect cost could help you plan ahead.

  • Your Business Size: What is the physical square footage of your business? What kind of space does it require? The larger the space, the larger the quote.
  • Location, Location, Location: Location is a key factor for multiple reasons. First, where you are located will affect your premiums because some states are more accommodating than others. Are you located in a state that is considered small business friendly or lawsuit friendly? Location also factors into other business risks like flooding, crime, and foot traffic. (More water, more thieves, more people in your storefront? More money.)
  • Business Sales Reports: How much money do you make? It’s pretty simple. The more money you make, the more insurance you’ll need. An actuary will look at your numbers and see how much you — or they — might stand to lose.
  • Your Business Industry: Offices require less capital to insure than, say, a traveling circus. Some industries are built with inherently more risk than others, and the insurance company will examine all the ins and outs of how your business operates to know the best ways to protect you.
  • Number Of Employees: More employees, more insurance. (Are we sensing a theme?)
  • Claim History: As with any insurer, the actuary will also look at your past business history and see if you have made any claims in the past.
  • Types Of Policies: The bigger your business, the bigger the policy. If you don’t have any employees and can stick with general liability, you will pay pennies next to a business that is working to protect employee incomes.

Ways To Save On Business Insurance

So, you want to protect your business but you don’t want to spend more than you need to? Maybe you can’t change where your business is located or your claim history, but here some tips on how to save on business insurance:

1. Bundle Policies

Bundling your insurance policies will often save you money. Consider a business owner’s policy which combines both general liability and commercial property insurance.

2. Shop Around

Insurance companies are in the business of sales and that lowest quote may not always be the best deal in the long run if the company can’t follow-through when you submit a claim. Your business is important enough to do the research. Five independent agencies (including Standard, Poor, and AM Best) rate the financial strength of an insurance company and you can use their services for free if you sign up for an account.

3. Choose A Higher Deductible

A deductible is the amount of money you will pay before your insurance kicks in. Choose a higher deductible and your premiums will go down.

4. Group Rates

Group rates might be available for your industry! If so, this route could save you the big bucks and possibly get you better coverage

5. Work With An Agent Who Specializes In Business

Go out and find an expert on small business insurance instead of settling for an agent who might not know the specifics of your industry.

6. Pay Your Premium In Full

It may be cheaper to pay your premiums for the year in one lump sum rather than spread them out in 12 monthly installments.

Where to Buy Business Insurance

According to Insureon, only 1 in 4 small businesses has adequate insurance and 80% of small businesses never recover after a disaster. Clearly, you need to protect your business, but where should you start?

All the major insurance companies carry commercial business insurance packages. So, places like Allstate, Farmers, Nationwide, and Chubb all offer competitive rates. Some companies, like Hartford and Hiscox, which specialize in small business insurance, have online quotes that walk a business owner through the process of optimizing their rate.

Again, it’s smart to check with the Better Business Bureau or your state’s department of insurance to examine the viability and strength of your insurer. Use the rating agencies and talk with business owners in your area. Ask around and shop around: this is your business baby and should the worst-case-scenario befall your company, you don’t want to end up in the 80% of businesses who have to close their doors after a disaster.

Comparing Business Insurance Quotes

Pre-internet days, a business owner might need to make an appointment with several insurance retailers and sit through long sales pitches before receiving a quote. Now, it’s easy to get an online quote from an insurance company in minutes over the internet. That isn’t to say that scheduling a face-to-face meeting with your top three insurers is a bad idea. Once you’ve narrowed down choices, talking to a real human being could help you make a final decision on what insurance company you trust the most.

Not all business insurance plans are created equally, so here are some things to consider as you compare:

  • Don’t just fixate on the premium number, but also look at the rate. As your company grows, the rate may increase as well and price you out of your own policy.
  • Cheaper isn’t always better. Carefully weigh the cost with the level of coverage you need and don’t skimp on the coverage you need just to pay less.
  • No insurance plan covers everything, so discuss and address exclusions to the policy to make sure there are no surprises.

Several websites also can do the initial aggregate work for you and compare all the major retail policies in one place. Check Bizinsure, Coverhound, and Insureon and have your company numbers ready to go (number of employees, sales data, business address, and square footage). You can grab comparison quotes from these websites in a matter of minutes.

After you’ve carefully researched and compared all of your options, pick the best one suited for your business. Consult an insurance professional for advice. Once you’ve found the right business insurance you can rest easy knowing that you got your business the coverage it needs — and without breaking the bank.

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Own A Business? Here Are 7 Types of Business Insurance You May Need

8 Types of Business Insurance You May Need

While making plans to start a new business, your instinct is probably to focus in on the positives. It’s not fun to sit around contemplating all the worst-case-scenarios that may occur — and even harder still to wrap your head around ways to protect yourself.

Business insurance may not seem like an encouraging object of focus when you’re just starting out, but it is one way small businesses can safeguard themselves, their employees, and clients from the everyday or occasional challenges that arise while running a business. The old adage says to hope for the best and plan for the worst; business insurance is there to give your brain a break from worry. You can rest assured that if something from the worst-case column happens, you’re covered.

But how do you know what kind of business insurance you should have? What insurance policies are required by law, and where do you even get started? In this post, we’ll cover the business insurance basics and explain the seven major types of business insurance so you can know exactly which insurance policies your business needs.

The Basics Of Business Insurance

For small business owners, constant rumination about risk and uncertainty is just a part of daily existence. There are numerous decisions to juggle, and you must account for all possibilities, including mistakes, mishaps, disasters, emergencies, and unexpected life events. Worries about how negative events could impact a business run the gamut, but there are many types of insurance policies designed to ease those worries and provide you with peace of mind.

Whether the intent is to purchase protection from flooding, damage to equipment, litigious employees and clients — or even from pollution, terrorism, and data breaches — small business owners need to carefully consider and examine which types of business insurance will work best for them (and which might be required by state law).

What Kind Of Business Insurance Is Compulsory?

Are you legally required to have business insurance?

The short answer is that mandatory business insurance varies by your company type, size, and the state you do business in. This is why it’s important to understand federal and state laws and to consult with an insurance professional to ensure that your business is compliant with all mandatory insurance requirements.

Most compulsory business insurance requirements are focused on making sure you treat your employees fairly and can compensate them in an emergency. The Federal Government requires that businesses with one or more employees provide unemployment and workers’ compensation insurance. State laws vary regarding compulsory business insurance, but most often their policies revolve around worker’s compensation, disability, and unemployment. Depending on how many employees a business has, a health insurance option might also be compulsory to comply with the Affordable Care Act. Renter’s insurance or property insurance may also be a requirement depending on your landlord and lease agreement.

Most Common Types of Compulsory Business Insurance
Worker’s Compensation
Health Insurance
Renter’s Insurance
Property Insurance

7 Major Types of Business Insurance

There are several major types of business insurance. While not every type is required by law, many are still a must-have for small businesses looking to safeguard and protect their business. Without the right type of business insurance coverage, a small business may have to face the brunt end of lawsuits, natural disasters, and other damages that could leave them bankrupt. And while no one likes the idea of paying extra for insurance, purchasing the right business insurance policy is a small price to pay to keep your business afloat.

Here are the seven most common types of business insurance that you may need:

1. General Liability

While general liability insurance isn’t required by law, for most small businesses some type of general liability insurance is a good idea as this type of insurance protects you in the event of a lawsuit or an accident. Claims against a business can arrive in the form of bodily injury, property damage, personal injury to a customer (including slander or libel), or false advertisement. General liability insurance guards a business against financial ruin if a client slips and falls on a wet floor or an employee damages a customer’s home. For all types of business owners, general liability also offers comfort to clients and ensures that they won’t be abandoned if an accident occurs.

2. Property Insurance

This type of insurance protects all of the property needed to run your business. A commercial policy would likely cover your building, business products inside your building, and other people’s property while it’s in your care. Property damage due to theft also falls into this category. The policy might be required for a lease agreement with a property management group, so if your business has a physical location, check with your landlord.

3. Business Interruption

If a business needs to close its doors due to a disaster — natural or otherwise–, business interruption service will repay the business the costs of lost revenue and business expenses accrued during the interruption. For example, if your store is flooded, your property insurance will get you back up and running in terms of damage, but if you had to close your doors for a few weeks, business interruption service will help offset the financial loss. Also, if you need to move your business to a new location because of damage, the policy will often pay for relocation and assist with lost income.

4. Commercial Auto Insurance

Commercial auto insurance protects business vehicles and drivers in the event of accident, natural disaster, vandalism, and theft. If your vehicle is an essential part of your business, ensuring and protecting the goods/services it provides is also essential. A commercial plan keeps the owner protected should driving mishaps occur, and it might be a necessary addition as many personal auto plans do not include provisions to cover vehicles used for business.

5. Worker’s Compensation

Workers’ Compensation insurance safeguards your business from any costs or lawsuits that may arise from job-related injuries, illnesses, or –gulp — death.

Any business with more than one employee is required to provide workers compensation for their employees; however, more specific guidelines are set by the state.

6. Professional Liability (E&O)

Professional liability insurance (commonly referred to as errors and omissions or E&O) covers the cost of defending your company in a lawsuit where the claim is that your business caused a financial loss for a client (errors) or did not perform a service as required (omissions). This type of insurance may be required for medical and legal businesses, but it is generally an add-on to liability insurance.

7. Umbrella Insurance

It’s true that insurance is in the business of worst-case-scenarios, but sometimes general liability insurance is not enough to protect you from the costs of litigation. Becoming the target of a lawsuit is a great fear and the outcome can be ruinous to a company ill-prepared to handle the financial burden. General liability provides an identified amount of coverage, but what if the claims exceed what liability coverage a business already has? Umbrella insurance swoops in and extends the ceiling on those general liability claims.

Additional Insurance Coverage Available For Your Business

While the seven insurance options above are the basics of business insurance, there are other types of insurance coverage to assist business owners with protection. Depending on your business type or industry, these additional coverage options may be a good idea to keep your company protected.

  • Business Owners Policy: Since so many businesses require both general liability and property insurance, many insurers offer a fancy package that includes both liability and property coverage. If an insurer references a business owners policy (BOP), it is a combo deal to cover both requirements.
  • Product Liability: Product liability exists to cover the damages of a lawsuit brought on by a faulty product.
  • Home-Based Business Coverage: Home-based business coverage is specific to entrepreneurs running out of their homes who might have home offices that need protection outside of a homeowner’s insurance policy.
  • Renter’s Insurance: If you’ve ever rented an apartment or house, you’re probably familiar with renters’ insurance, but it plays a role for businesses as well. Renter’s insurance might be needed if you are renting or leasing a location for your small business.
  • Cyber Insurance Or Data Breach Insurance: Cyber insurance or data breach insurance is there to protect businesses from the costly after-effects of a data breach. This policy also gives the insurer access to people who can assist them through the legal scrutiny of following data-breach protocol.
  • Directors & Officers Insurance: Directors and officers insurance is designed to offer financial protection in case a director or officer in your business faces legal trouble due to business-related actions.

What About Health Insurance?

In 2010, the Federal Government passed the Affordable Care Act (ACA). Since that time, tens of millions more Americans have had access to health care through a health care mandate. Many of these newly insured were small businesses owners, small business employees, or the self-employed. Through a marketplace specifically for small business owners called the Small Business Health Options Program (SHOP), more people had the opportunity to secure health insurance.

So, what does the Affordable Care Act (ACA) mandate for small businesses in terms of health care? If your business is considered an Applicable Large Employer (ALEs) with 50 or more full-time employees for more than six months out of the year, then you will need to provide your employees with health insurance as a legal requirement of the ACA. In short: an ALE will need to comply with the ACA. (A quick zip-code check over on healthcare.gov will direct you to the SHOP or health care program available in your state.)

If your business is not an ALE, then supplying health care for your employees is a choice. There are several options available for small businesses who want to remain competitive by offering insurance options. Another perk of choosing to offer health insurance to your employees is that you may be eligible for the Small Business Health Care Tax Credit if you provide insurance.

How To Choose Business Coverage Insurance

All small business are different and have different needs. When considering what types of small business insurance you need, first check state laws to ensure you are following all legal requirements and mandates. After you know what insurance you are legally required to have, it’s time to start thinking about other types of insurance would benefit your business.

To determine which type of insurance is right for you, outline the biggest risks in your industry and choose a plan that suits those risks the best. Do you have vehicles running around for you? Commercial auto is a must. Is your business located in a place that might be impacted by the weather every year? Business interruption service might be perfect for you.

When it comes to running a business, you can never be too prepared. In the end, choosing the perfect type of business insurance can protect your business from claims, property damage, and other disasters, and can give you peace of mind, so you can stop worrying and get back to business. Always consult with an insurance professional for the best advice on what type of insurance is right for your business.

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