Business Insurance: 5 Tips on Preparing for Growth

By Pedro Hernandez | Posted March 29, 2013

The economy is picking up, and that's great news for small business owners. Or is it?

Economic booms -- or boomlets, let's not get too far ahead of ourselves -- are rife with opportunities for small businesses. But not if they're caught unprepared.

While shop owners worry about staffing up and capital improvements, they often forget to consider their business insurance policies. When circumstances in your personal life change – marriage, children, or homeownership – you adjust your insurance to keep pace. It's no different for your startup or small business; when circumstances change, you should adjust your insurance policy to reflect the changes.

You've worked hard to position your company for growth, so that when the economy improves, your bottom line keeps pace. Shoving insurance to the bottom of your to-do list threatens all that hard work.


John P. O' Connor, a vice president at Travelers' Small Commercial division, shares some business insurance tips that entrepreneurs should discuss with their agents as they manage their companies' growth.

5 Small Business Insurance Tips to Manage Growth

1. Protect against cyberfraud and hackers

When it comes to fraudsters and hackers, small businesses have big targets painted on their backs. "Small businesses suffer cyber losses and hacking losses at a rate that's just as big as for big businesses," informs O' Connor.

Think of all of the sensitive data that resides on your network, computers and devices. Employee data, customer records, product designs, and banking information: all of which is very tempting to a scammers and thieves. Unfortunately, not every Business Owners Policy (BOP) product offers coverage for your business data.

Look for insurance products that not only get you back on your feet if business stops because you were hacked or suffered data loss, but will also cover costly remediation and customer notification services (in the event customer data was leaked) or lawsuits.

2. Take 'stock' of your inventory and supply chain

According to O' Connor, things to consider include the "damageability of your inventory" and the "proper storage and protection of your inventory." If you're doing brisk business, maybe your needs have exceeded those of your old stockroom. Now is the time to consult an insurance agent.

Sometimes, it may not even be up to you.

What if one of your major suppliers goes out of business or suffers a warehouse fire? Look into insurance products that replace the profits that otherwise would have gone up in smoke along with your former supplier.

3. Plan built-in backups and contingencies

For once, we're not talking about data backups. (Nonetheless, backup your data anyway!)

O'Connor says that the sign of a good insurance agent or provider is one that "not only provides insurance solutions, but also talks about risk control and ways to mitigate risk." For businesses, that means having redundant and contingent suppliers, informs O'Connor.

"There's a lot of work that small business can do before the loss," encourages O'Connor. With a proper plan, the loss of major supplier can result in a minimal disruption instead of turning into a business killer.

4. Properly train and vet new and temporary workers

It's common to increase headcount when business picks up. Can your business handle new workers and the responsibilities that come with them?

Business insurance policies and workers compensation protect both employers and employees in the event of an injury. But why even let it come to that? "Make sure that they're trained properly" and that they're constantly trained, advises O'Connor.

And be sure to look into their pasts before they're hired. For instance, some insurance carriers offer pre-employment screening services (background checks) that helps business owners make sure that potential new hires are who they say they are.

Do any of your employees drive on the job? Don't forget motor vehicle reports, says O'Connor. You don't need a daredevil behind the wheel of your delivery van.

5. Review your Business Owners Policy (BOP)

Does your Business Owners Policy (BOP) reflect the nature of your company as it exists today?

Success often means that it's time to expand, buy new equipment and add to your employee count. Your BOP, if you even have one, may not be keeping up. O'Connor says that in terms of business insurance, there is nothing to fear.

The typical insurance agency is an "independent business that's going to work with the small business owner," says O'Connor. Still stymied? At the very least, suggests O'Connor, seek out "a package policy that includes property coverages, includes business interruption and repays your profits."

It's a good starting point for finding the protections that your growing business needs.

Pedro Hernandez is a contributing editor at InternetNews.com, the news service of the IT Business Edge Network, the network for technology professionals. Follow him on Twitter @ecoINSITE.

Do you have a comment or question about this article or other small business topics in general? Speak out in the SmallBusinessComputing.com Forums. Join the discussion today!

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