As soon as an entrepreneur opens his doors for business, he exposes himself to a new realm of risks and liabilities. Before the first employee joins the payroll, businesses take risks a regular person doesn’t. This makes it increasingly important to buy the right small business insurance.
Otherwise, a single lawsuit can rain down terror and destruction on your financial life. In fact, a single lawsuit could wipe your business off the map before you even started.
1: Professional Liability Insurance
You might also hear this form of insurance referred to as errors and omissions insurance, and it covers your company against negligence because of a mistake or failure to perform.
Before you buy this insurance, understand that specific advice on how much you should buy depends on your industry. You can address your concerns with a customized policy.
2: Property Insurance
Businesses will need property insurance, whether they buy or lease a property because this covers everything from equipment to inventory to signage to furniture. If fire, storm or theft destroys your business, you will have coverage.
Unfortunately, most insurance policies don’t cover earthquakes, and you will have to upgrade above and beyond the standard property insurance policy. Earthquake insurance makes the most sense if your region sees frequent seismic activity.
3: Workers’ Compensation Insurance
In the world of business, accidents happen. Anything from heavy equipment falling on a person to slipping on wet tile can lead to a claim. Unfortunately, people get injured, and before you have hired the first employee, you should add this to your small business insurance.
It covers the cost of medical treatment, disability, and in the event someone dies on the job, you will have small business insurance to eat the expenses. Remember, even a low-risk task like mopping the floor can lead to a slip-and-fall injury. It could also lead to pricey medical conditions like carpal tunnel syndrome.
4: Home-Based Business Insurance
Plenty of small businesses start within the garage of their own home. However, regular homeowner’s insurance policies have carefully designed their coverage to exclude home-based businesses.
In the event a fire guts your home, you could lose everything related to your business, so you want to ask your insurance agent to cover the inventory and equipment if a problem tears through your home.
5: Product Liability Insurance
Businesses that manufacture products for sale on the general market will need product liability insurance. This has become a must because even when businesses take every measure possible and examine their product from a thousand potentially dangerous angles if a customer sprains their leg or loses an eye because of your product, a lawsuit can eat up much of your profits.
Product liability insurance protects your business and the coverage. You can also tailor your coverage to a specific product sold if you see one product has a higher risk.
6: Vehicle Insurance
Company vehicles should have full insurance to protect your company from liability in the event of a car accident. At the minimum, a business should protect themselves against the possibility of a third-party injury. Nevertheless, comprehensive insurance covers your vehicle if it sustains damages in the accident. You especially want this if your business depends on the vehicle for delivery.
One example might be a pizza parlor. When you deliver pizzas, and the company car wrecks itself in an accident, you can sustain huge financial losses against your business. There are, however, cases where you don’t have to worry about this.
For example, employees who use their own personal insurance with their own car will cover themselves if an accident happens. A common exception to this, however, is when they deliver services or goods for a fee. That especially includes the delivery personnel.
7: Business Interruption Insurance
Small business insurance should also look at if a natural disaster or event hits your business operations, and you suffer from a loss of income because your staff can’t work. What do you do? When these events interrupt your business operations, small business insurance will cover when your employees can’t make sales calls or manufacture products because of a severe power outage or whatever.
Business interruption can cost companies thousands of dollars. To give an example, Google experienced a 5-minute outage where they lost more than 40 percent of their customer base. The results? It cost them $500,000 for five minutes of time or $100,000 for every minute they were offline.
This type of small business insurance especially works well for companies with a physical location like a retail store or call center. Business interruption insurance will compensate you for your loss in income.
8: Personal Umbrella Insurance
Along with the main policies you have enacted, you may want to add additional coverage on top of your insurance policies because this covers you for specific events. Personal umbrella insurance extends your current policies and covers more specific events like bodily injury, property damage, personal injury and business losses.
9: Data Breach Insurance
Some entrepreneurs may think they don’t need this type of small business insurance. However, data breaches don’t just happen to the big companies. In fact, many hackers target small businesses because they know they won’t take the right safety measures, and they’re an easy target.
If your company stores confidential information about customers or employees, you have a legal responsibility to protect this information. Whether a breach occurs via paper file or electronically, your insurance policy will hand you protection from the loss.
Putting It All Together
Small business insurance provides your company with a defense from a number of dangers. As soon as you open your doors for business, you put yourself at risk to some of these claims, but most entrepreneurs wouldn’t be happy at a job where they weren’t the owner and operator.
So, you simply prepare for these things by buying the right insurance. It becomes a cushion that will at least keep your company afloat in the event of a liability claim.