Insurance is an essential part of running any business. Seven million small companies depend on commercial insurance to stay afloat. However, the number is low compared to the total number of small businesses in the USA, which is over 39 million. But there’s a shift in small-business insurance demand after the Covid-19 pandemic.
The sad thing is that most businesses understand the importance of insurance, but they don’t take it for various reasons. If you are a small-business owner and don’t have an insurance policy, you are taking dangerous risks.
The right policy can protect your company from financial loss and help you manage unexpected costs. But with so many different types of insurance policies on the market and more being created daily, how do you know which ones are right for your company? For example, do you want standard coverage or innovative coverage? This article will explain the difference between standard and inventive policies and when one might be better than the other for your company.
Standard vs. Inventive Insurance Products
Standard policies are more common and are less expensive than inventive policies. But there are some situations where you should consider an innovative approach.
Inventive policies are often called “tailored” insurance products because they can be tailored to the needs of your business. For example, an innovative insurance policy may be your best option if you have a large amount of risk for which no standard coverage exists.
You’ll want to work with a broker or agent who specializes in these types of business arrangements so that they can help design a unique plan that meets your needs and protects against any gaps in coverage that might exist elsewhere in your portfolio.
While innovative insurance programs are tailored to your specific needs, they might go wrong as they are not tried and tested thoroughly. Moreover, they can require high premiums, which cannot be worthy for small businesses on strict budgets.
What Do You Mean by “Standard” Insurance Products?
A standard insurance policy is an insurance product that’s been around for a long time and offers basic coverages. It’s one of the most common policies and is well-known to insurance brokers, agents, and consumers.
Most businesses purchase general liability insurance, which is standard insurance. Standard policies may be monoline or packaged.
Monoline insurance policy provides coverage for a single aspect of the business. For example, a monoline property insurance will only cover the property. This will include covering the costs of damage to the property. It will not extend to other risks, such as liability or homeowner and tenant insurance.
Package policies, on the other hand, provide coverage for several risks. They are like a bundle of combined policies to offer maximum customer benefits.
A standard product can be found in any store or online store selling insurance products, from small local companies to large global ones. According to data, Prudential Financial, Berkshire Hathaway, and MetLife Inc are the top three insurance providers in the USA. However, the problem with the top insurance providers is that the premiums of their policies can be extremely high. Hence, it is wise to go with small insurance companies when necessary.
Of course, it should go without saying that every company has its own unique set of standard products—but there are some general trends when it comes to what makes a product standard:
- Ease of understanding and application: Since most people have heard about these kinds of policies before (and know how they work), they’re easy for both businesses and consumers alike to understand what you’re talking about when offering them options on your platform.
- Availability from many different providers: As previously mentioned, there’s a massive market for standard policies because they’re so popular. This means many competitors provide them, even if you choose not to provide them yourself directly through your platform/software. The competition also helps keep prices low, which means more money is left over after paying monthly premiums.
What Are “Inventive” Policies?
Inventive policies are more specialized, making them more challenging to find. Innovative approaches are priced differently as compared to standard policies. The complexity of innovative policies can make them more challenging to understand and explain than a standard policy. Inventive policies may not be available at all in some states or regions. You should also remember that there may be a limit on how much of your coverage can be made up of inventive policies.
Inventive policies are created to address the unmet needs of the customers. Hence, many businesses find them lucrative enough to give them a try. A recent study concluded that business owners are looking for more flexible and innovative policies for optimized coverage.
Who Needs Inventive Insurance Policies?
Inventive policies are designed for businesses that are at risk of litigation. If your business is subject to a high-risk environment and has been sued before, or if its products or services could be considered dangerous, then inventive insurance policies can provide coverage for the unique risks associated with your industry.
Inventive insurance policies are also customizable, meaning they can be tailored to meet the needs of your business. For example, suppose you own a restaurant and sometimes serve food that causes allergic reactions in customers who eat it. In that case, inventing an insurance policy will help you avoid paying out-of-pocket for lawsuits related to their illness.
In addition, inventive policies offer more protection than standard ones because they cover more than what’s required by law. This means that if someone sues your company and wins their case against it (even when no laws were broken), having an inventive policy will also protect against potential losses due to these claims.
A typical example is pay-as-you-go workers’ compensation insurance, which relies on real-time payroll metrics to adjust premiums. Another example is insurance for online sellers.
However, a very tight budget business doesn’t need an inventive policy. If you are a startup, you might want to put funds on other essential things like enhancing customer experience, marketing products, improving products, hiring the right talent for your company, etc., instead of giving additional premiums on innovative programs.
In conclusion, it’s important to remember that the right choice for one business might not suit another. It’s up to you to know your needs and wants so that you can find the best policy possible. Ask an insurance advisor if you’re still unsure what coverage best suits your company.