How to get business insurance, step by step

Getting business insurance comes down to six steps: work out which policies you need, gather the facts an insurer will ask about, choose how you’ll buy, compare quotes on equal terms, answer the underwriting questions accurately, and bind the policy so you can send a certificate of insuranceCertificate of insuranceA certificate of insurance (COI) is a one-page summary that proves your business has insurance, listing your policies, limits, insurers and policy dates.Read the definition to whoever asked for one. For a small business with a simple setup, that can happen in a single sitting, but for one with a lease deadline, a client contract and a first employee all landing at once, it’s worth doing in order, because skipping a step is how owners end up buying twice.

The SBA’s own buying advice is short: think about which accidents, disasters or lawsuits could damage your business, find an agent who understands your needs, and shop around, since prices and benefits can vary a lot. The rest of this guide fills in what each of those means in practice.

Step 1: Decide what you need before you shop

Start with two lists. The first is what could go wrong: someone hurt at your shop, a mistake in your work, a fire, stolen tools, a burst pipe that closes you for a month, an employee injured on the job. The second is what you’ve been asked for, which lives in the insurance clause of your lease, your client contracts and any subcontract, and it usually spells out the policies, the limits and the endorsements, such as an additional insuredAdditional insuredAn additional insured is a person or company, such as a landlord or client, added to your liability policy so it can protect them from claims tied to your work.Read the definition or a waiver of subrogationWaiver of subrogationA waiver of subrogation is an agreement, usually added to your policy by endorsement, that stops your insurer from recovering claim payments from a specific client, landlord or contractor.Read the definition.

You need both lists. The contract list on its own covers the landlord and the client, but it rarely covers your equipment or your income, and the risk list on its own can leave you short of a limit or endorsement someone has a right to demand. Our guide to what business insurance a small business needs maps each risk to a policy.

Step 2: Gather what the underwriter will ask

Quotes come from underwritingUnderwritingUnderwriting is how an insurance company evaluates your business’s risk to decide whether to offer coverage, on what terms and at what premium.Read the definition, which is the insurer working out how likely you are to have a claim and how big it could be, and it runs on facts about your business. Have these ready before you start:

• What you do, in plain words. The description decides the class codeClass codeA class code is a number insurers use to classify what your business does, so your rates reflect the typical risks of businesses doing similar work.Read the definition, and the class code shapes most of the price.
• Where you operate. Your address, any other locations and whether you work at clients’ sites.
• Revenue and payroll. Usually your estimate for the coming year, split by type of work if you do more than one thing.
• Employees. How many, full-time or part-time, and what they do.
• Years in business and claims history. A loss runLoss runA loss run is a report from your insurer listing the claims filed under your policies over a set period, with dates, amounts paid and whether each is still open.Read the definition from your current insurer, if you have one.
• What you own. The replacement value of equipment, stock and improvements, if you’re buying property coverage.
• Your contract requirements. The insurance clause itself, so the quote matches it the first time.

The full quote checklist has more on where to find each item.

Step 3: Choose how you’ll buy

There are three common ways to buy, and they differ mainly in who is working for you and how many insurers you’ll see.

An insurer that sells directly lets you get a quote and buy from the company that will carry the risk, often online. An agent sells on an insurer’s behalf, and the NAIC explains that a captive agent sells for only one company while an independent agent may sell policies from many. A broker, in the NAIC’s description, represents you by searching the market, and the NAIC notes that for more complicated purchases, such as coverage for a small business, you may choose a broker.

Which is right? It depends on how complicated you are. A café, a consultant or a salon buying standard policies against a clear lease or contract can do well quoting directly, because the questions are straightforward and the speed matters. A business with unusual operations, several locations, a large fleet or a hard-to-place risk may get more from a broker who can take it to several markets instead. Whichever you pick, though, you’re still the one who has to read what you’re buying.

Step 4: Compare quotes on equal terms

This is the step where owners lose money without noticing. Two quotes for “general liability” can look like the same product at two different prices when they’re two different products, and the cheaper one is often cheaper because it covers less.

The NAIC’s small-business guide tells owners to compare the costs of equivalent coverage from several insurers, and “equivalent” is the hard part. Line the quotes up and check, in this order:

1. The same policies. One quote may bundle property or business income that the other leaves out.
2. The same limits. Check the per-occurrencePer-occurrence limitA per-occurrence limit is the most a liability policy will pay for all claims arising from a single incident, however many people are hurt or claims are filed.Read the definition and aggregate limitsAggregate limitAn aggregate limit is the most a policy will pay for all covered claims combined during one policy period, no matter how many claims you have.Read the definition, and any sublimitsSublimitA sublimit is a smaller cap within a policy’s overall limit that applies to one specific type of loss or coverage, and it doesn’t add to the overall limit.Read the definition buried inside them.
3. The same deductibles. A higher deductible generally lowers the premium and raises what you pay on every claim.
4. The same endorsements. If your lease requires an additional insured endorsement, a quote without it isn’t a real option yet.
5. The same trigger. A claims-made professional liability quote and an occurrence quote work differently, and occurrence vs. claims-made explains why the retroactive date matters.
6. The same exclusions. Ask for the forms, or at least the list of exclusions and endorsements that would be attached.

Price still matters, of course, but it can’t be compared until everything else is equal, and how much business insurance costs explains what moves it.

Why does the application ask so many questions?

Because every answer changes either the price or whether the policy will pay. The description of your operations decides your class code, your revenue or payroll is often the base the premium is calculated on, and your claims history tells the insurer what to expect, which is why the NAIC notes that a high past-claims history can raise insurance costs.

Answer them accurately. That includes the parts you’d rather round down. An estimate of payroll or revenue that comes in too low is usually caught at the premium auditPremium auditA premium audit is the insurer’s review of your actual payroll, sales or other figures after a policy ends, used to replace estimates and set your final premium.Read the definition after the policy ends, which turns a low quote into a bill for the difference. But a description that leaves out a kind of work you do can be worse than an audit bill, because a claim from that work may run into the policy’s description of your business or into an exclusion written for that kind of work.

Step 5: Bind coverage and get proof

Binding is the moment the insurer commits. You accept a quote, pay or arrange payment, and the insurer agrees to provide the coverage from an effective date and time that you choose, which can be today or a later date. Coverage starts on that effective date. Set it to match the day your lease starts or your contract work begins, because a policy bound today for next month leaves you uninsured until next month, however finished the paperwork looks.

Then the paperwork comes in a few pieces. Some insurers issue a insurance binderInsurance binderAn insurance binder is a temporary document confirming that coverage has started while the insurer finishes issuing the full policy.Read the definition, a short temporary document showing coverage is in place until the policy is issued, while the certificate of insurance is what landlords and clients ask for, a one-page summary showing your coverage, limits and dates. If they need to be an additional insured, that has to be added to the policy by endorsement before the certificate can show it. The full policy, with its declarations pageDeclarations pageThe declarations page is the summary at the front of an insurance policy listing who’s insured, what’s covered, the limits, deductibles, premium and policy dates.Read the definition, forms and endorsements, follows, and the NAIC tells people buying insurance online to expect their policy within 30 to 60 days of purchase and to contact the insurer if it doesn’t arrive. Thirty to sixty days is a long time to wait, though, for a document you may need to show someone next week, which is why the certificate matters more on day one.

With Corgi, you can get a quote online in about five minutes, underwriters, not a broker, answer your questions along the way, and your certificate of insurance is available the day you buy, so you can download it or send it to a landlord or client straight from your account.

Step 6: Keep it current after you buy

Most owners treat buying insurance as a one-time job. It’s closer to a yearly one, though. The NAIC’s small-business guide advises reviewing all your policies annually and noting changes that may affect your coverage costs, and the moments that matter most are easy to list: a first hire, a new location, a big new contract, new equipment, a jump in revenue or payroll, or work you didn’t do last year.

Keep the full policy with your lease and major contracts, along with your application, your certificates and your payment records, since the NAIC also advises keeping detailed records of what you bought. If your premium goes up at renewal, your business insurance renewal went up covers what to ask, and how to switch business insurance without a gap covers moving to a new insurer.