Chapter 2: Understanding Cleaning and Janitorial Insurance Policies
Part 1: What Is Business Insurance and Why Do You Need It?
Chances are, you're already more familiar with the way small business insurance works than you realize.
For example, if you drive a car, you probably have auto insurance. Your auto insurance covers many of the risks involved with driving a vehicle, such as car accidents, car theft, and property damage. When you have an automobile accident, your insurance pays for the expenses — as long as you pay for your insurance.
Similarly, small business insurance keeps your cleaning company from paying for losses out of pocket. Just as car insurance won't prevent a car accident from happening, business insurance can't keep your equipment, for example, from catching fire. However, insurance gives you the resources to handle the costly aftermath of unpreventable risks.
When you purchase small business insurance, you receive the guarantee of financial compensation for certain covered events. In order to understand how insurance works, familiarize yourself with the following terms:
- Insurance policy. The contract that outlines the terms of your coverage agreement with the insurance company.
- Inclusions. These are the expenses that your insurer pays for. Common inclusions include compensation for lawyers' fees, court-ordered payments, medical expenses, property replacement, and more.
- Exclusions. These are loss events that are not covered by your insurance policy.
- Premium. The amount you pay for your insurance protection. Depending on the terms of your policy, your premium may be paid monthly, biannually, or annually.
- Deductible. The amount of money you must pay toward a covered claim before your insurer kicks in the rest. Generally speaking, the higher your deductible, the lower your premium is.
- Coverage limits. The maximum amount of money your insurer can pay toward a claim. Many policies come with two limits: one per incident and one aggregate, which means for the life of your policy (usually a year).
Though you may think your business is too small to justify purchasing insurance, consider that, according to FEMA, almost 40 percent of small businesses fail to reopen after a disaster — such as a fire — strikes.
If money is tight now, think about how strapped your cleaning business would be if you had to replace fire-damaged property. Just like that, your entire life savings could vanish to finance a loss.
All things considered, the premiums you pay for adequate business protection don't hold a candle to the losses you could experience if you remain uninsured. Instead of viewing insurance as an extra expense, think of it as an investment in the future of your business.
Next: Chapter 2.1.A: How Much Will Your Insurance Premiums Be?
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