How Much Insurance Do You Need?

Once you have determined the types of insurance you may need, you must accurately assess how much insurance you need.

Too little insurance for example carrying only the minimum amount of liability insurance on a vehicle that is required in your state leaves you vulnerable. On the other hand, paying $500 a year for theft insurance on a vehicle with a book value of only $1000 will bleed cash from your business and get you very little protection in return.

Use the following process to help you buy enough insurance without overdoing it:

  1. Ask yourself if the insurance in question is designed to protect you in the event your property is damaged or whether it insulates you from the liability associated with hurting other people and their property. In most policies, these components have separate limits. As a small business owner, it's probably better to be a little overprotected on the liability side, versus the property side, of the insurance equation.
  2. If you're dealing with property insurance:
  3. If you're dealing with liability insurance:

If you have followed these steps, it should help you to limit your insurance coverage to what you need. However, if the quotes from your agent still seem too high, or have you been told that certain aspects of your business are uninsurable, you may wish to explore some alternatives to insurance.