This is a question many business owners find asking themselves. More in particular home-based businesses and professional services, such as our insurance practice. But, unless you can meet capital and regulatory requirements for being “Self-Insured,” then you need insurance.

Typically, most business owners will believe no physical claims can happen but not take into account verbal or advertisement claims.

For example, a home based tax services business may not have clients visit them but may have a claim for giving wrong advice to a client. This is where an Errors & Omissions policy would need to be in-place, which can help cover legal defense costs.

Furthermore, a home based business markets to potential clients online and have a claim for advertisement injury from a photographer for using their photos without permission. This is where a General Liability policy would need to be in-place.

The easiest way to buy insurance is to work with a licensed insurance professional that has experience working with your type of business, can sell or connect you with policies from reputable insurance carriers, and has experience dealing with the types of insurance your business needs.

For example, one aspect of buying an insurance policy is to make sure the insurance carrier you are going to be covered by will be able to cover your claims. How? Each carrier is given a financial credit rating issued by A.M Best, which is a global credit agency specializing in the insurance industry, ranging from A++ through D. To check a rating, click on the link below.

Search for a Best's Credit Rating

Furthermore, making sure the policy you are buying will cover what you are looking to get covered for and you understand what your policy will not cover. How? Each policy (or quote) will have a page titled “Exclusions” which details what the policy will not cover.

Lastly, verify the license of the insurance professional you are working with has a current, valid license in-good standing. To check a license, click on the link below.

Check a License

The options to purchase insurance coverage for a business can be simple or complex, depending on a number of factors such as industry, operations, services, and/or location.

Depending on those factors can lead a business to purchase a policy from either an “Admitted” or a “Non-Admitted” insurance carrier.

An “Admitted” insurance carrier is a carrier that has been admitted by a states Department of Insurance and complies with a states regulations, whereas a “Non-Admitted” carrier has not.

Whether an “Admitted” or a “Non-Admitted” carrier will benefit a business owner will depend on the business.

Endorsements are modifications, or a modification on an insurance policy, that adjusts coverage by adding or modifying a coverage.

The functions of an endorsement can include but not limited to broadening coverage, limiting or restricting coverage, adding or removing parties or locations on an application.

Exclusions on an insurance policy are the events a policy will not cover, which can be based on certain acts, property, types of damage, or cause.

This is as important as what your policy can cover.

An Agent represents one insurance company and authorized to sell only that insurance carriers coverage products.

A Broker represents clients and authorized to sell insurance products from a variety of insurance carriers.

An Agency is an insurance firm that offers insurance products only for the insurance carrier that location and staff represent.

A Brokerage is an insurance firm that represents clients and authorized to sell insurance products from a variety of insurance carriers.

An insurance partner will be one that offers you more than just buying an insurance policy.

For example, at the end of every term for an insurance policy, insurance carriers will issue an audit to determine the final premium. Will you get help with an audit?

If you are a contractor, and you often need Certificates of Insurance, will the Certificates of Insurance be provided to you directly in a timely manner at no additional cost?

If you have employees, and you don’t have a Safety Plan required by OSHA, will you get help with implementing a Safety Program?

These are some questions to think about and to ask, when choosing an insurance agency or brokerage for your business.

By law, insurance professionals must advertise their insurance license number for each state and product licensed for.

To learn if a license is active, valid, and in-good standing, you can visit the Department of Insurance website, or to check in California, click on the link below.

Check a License

Compensation is commission based, for a specific percentage, set by an insurance carrier.

Broker fees are also another form of compensation but why a broker fee is billed to a client varies from agent and broker, agency and brokerage.