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Five things you should know before buying small business insurance

(ARA) - Most savvy business owners would never dream of driving without auto insurance, or risking their family's financial future by foregoing life insurance coverage. So why do some small business owners operate without insurance for their company?

Some may think that good business practices, great customer service, quality products - and even luck - are enough to negate the need for business insurance. In reality, many scenarios beyond your control could put you in a position of needing the protection insurance affords. For example:

* An employee becomes ill or injured while on the job.

* A customer gets hurt while in your store or on your property.

* A client sues you over a contract.

* A competitor sues your company for copyright infringement, patent infringement or even defamation.

As the economy continues to improve, your business will have the opportunity to grow and expand. Business insurance helps protect your company against the additional risks that come with growth. Before you purchase insurance for your small business, keep these five key points in mind:

1. Know who you're buying from. The Internet has made it easy to shop for insurance of all kinds. But the sheer volume of information and sales pitches online may be overwhelming, making it difficult to separate the come-ons from the legitimate offers. Consider using a web-based service like American Express OPEN's InsuranceEdge, provided by BOLT(SM). InsuranceEdge is designed to help small business owners get multiple business insurance quotes from trusted providers.

2. Cheapest is not always best. A less expensive policy may also offer less coverage than one that costs more. Or, the company may have a reputation for dragging its feet on paying claims. In other cases, the policy may start out with low premiums, only to have premiums skyrocket later on. Rather than basing your decision on price, take into account factors like the company's reputation, longevity and the exact coverage being offered.

3. Does the company specialize in the kind of business insurance you need? Generally, there are four types of business insurance: general liability/business property, worker's compensation, commercial auto and umbrella. The policy you purchase should make sense for your business and the work you do. For example, if your business doesn't need a company car, you won't need business auto insurance. If you are the only employee of your company, you may be able to forego worker's compensation. The company you buy from should understand your business and the type of coverage that will most benefit it.

4. What coverage does the policy entail? While insurance policies are notoriously complicated, it's important you understand the exact terms of coverage. And don't be afraid to ask for more than the basics, especially if you need to cover risks not already mentioned in the policy.

5. What is the deductible? Most business insurance policies come with a deductible. A higher deductible will likely mean you pay less for premiums. But be sure you have enough of a nest egg to cover the deductible in case you need to file a claim. A lower deductible usually means higher premiums. Consider how frequently you might actually incur a covered loss, and how much of that loss you can afford to carry yourself. Your deductible should never be more than the amount of loss you could afford to carry on your own.

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