Commercial Insurance: One Size Does Not Fit All

The mom-and-pop shop selling daily essentials has different insurance needs from a nationwide big-box chain. But what about everything in between? And do you know where your business falls on the spectrum?

Depending on whether a business is small, medium, or large, it has different insurance needs. It may be difficult for owners to determine how to categorize their company, especially as it grows. To establish the size of your business, look at the number of employees, total sales, and earnings. Following is the breakdown of generally accepted numbers for the three size categories and the appropriate insurance for each.

Small businesses

Typically, businesses with 50 or fewer employees are small businesses. They are independently owned and operated and are not industry leaders. The small-business sector, however, is considered the engine of the economy and employs 94 million employees (some 77.8% of private sector US workers, according to the Bureau of Labor Statistics).

For small businesses with fewer than 100 employees and revenue of $5 million or less, insurers usually offer a Business Owners Policy, or BOP. These standard policies are generally sufficient to provide coverage for your company against common risks. If your business has unique needs that you feel might not be covered, consult with your insurance agent to determine if you need a customized policy.

Medium-size businesses

If you employ between 50 and 1,000 staff and generate between $10 million and $1 billion, you are considered a medium-size business. This medium-size status makes you large enough to need additional insurance coverage. Insurers offer policies specifically designed for medium-size businesses that may combine liability and property coverage. Medium-size-business owners with expensive equipment or locations in several states may need specialized policies.

Large businesses

When a business has more than 500 employees, it’s considered a large business. And it faces multimillion-dollar risks. Commercial insurance policies for this level of business are customized to meet the specific needs of each company. One (or more) of the 500+ employees is likely responsible for risk management. This involves identifying areas of potential losses, recommending insurance coverage, and managing claims with the insurance carrier.

What about home-based businesses?

If you are running a business out of your home, you are likely the sole employee and are not yet generating a great deal of revenue. But this doesn’t mean you should skip business insurance. More than 500,000 American businesses are located in their owners’ homes, and many don’t carry the appropriate insurance. Homeowners insurance is often not enough to cover your home-based business; property loss or liability related to your company may require a different policy. Check with your insurance agent on the coverage you need based on the type, size, and scope of your home business.

Are you still unsure about your business size? Does your company have special services, products, or circumstances you feel might not fall into a typical category? Your agent will review your options and help ensure your business has the protection it needs.