How To: Buy the Right Business Insurance

The coverage you need and (because no one likes to waste money) don't need.

Your business faces plenty of threats -- from fire to fraud, from dishonest employees to discontented customers to disconnected utilities. And yet for nearly every peril, some insurance company somewhere is willing to underwrite protection. Therein lies your dilemma: You can go broke keeping your company secure.

The agents, risk managers, and small-business consultants Inc. spoke with warned that insurance purchases can be driven by exaggerated fears, particularly of litigation. So before shopping for coverage, investigate what perils a company in your industry is most likely to face -- and which could threaten your company's survival. "It's not the run-of-the-mill loss you should be thinking about, but the home run, out-of-the-park catastrophe," says David Young, a former insurance broker and risk manager now advising at the Small Business Development Center in Seattle. Belinda Pillow, who runs the SBDC in Waco, Texas, and who used to sell insurance, recommends a call to your trade association. "Ask for any risk assessment tools for, papers on, or expert opinions about your particular industry," she suggests.

These pages will walk you through some of the most common types of coverage. You probably won't need them all; some you likely already have. Even if you think you're covered, however, you may be mistaken. Companies much larger than yours have gone to the mat with their insurers and come up empty-handed. Your task when buying insurance is to steel yourself for the mind-numbing language of the policy -- and to know precisely what's covered and what's not. If you don't see the coverage you're looking for, or you don't understand some of the terms, seek clarification from your agent.

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