Small Business Insurance

Small Business Insurance:
Wise investment…or risky business?

Love it or hate it, small business insurance could be one of the best investments your company can make. Especially if the unthinkable ever happens.

After all, have you ever considered how you would recover if lightning strikes and fries all your computers and electronic systems? Or how you would make payroll if your partner absconds with the profits? Without small business insurance, chances are good that your business would be a long time recovering. If it ever did.

From workers compensation to keyman coverage, small business insurance policies offer a multitude of options. And deciding which coverage(s) to buy can be a little overwhelming. That’s why I’ve highlighted below some of the most popular forms of small business insurance…to help you make the decisions necessary to protect our business.

Obviously, the more insurance you have, the more you’ll pay in premiums. As a small business owner, you will have to weigh the cost against the risks to decide if the coverage is justified. As with anything about which you are unsure, get advice from a professional or trusted mentor who is familiar with your business before you make a final decision.

Liability Insurance

There are several different kinds of small business liability insurance for you to choose from, depending on your need. Here are three of the most popular:

General Liability:

This will most likely be the main pillar of coverage for your small business insurance portfolio. General Liability insurance - also known as Commercial General Liability (CGL) and “umbrella liability” - is designed to protect your business from property damages, bodily injury claims, medical expenses, the cost of defending lawsuits, advertising claims, etc.

Product Liability:

If your small business manufactures, wholesales, distributes, or retails a product, this may be a good form of insurance to have in case someone who uses the product becomes injured. The cost of this type of insurance and the amount of coverage you need depends in large part on the type of product and the level of risk involved.

Professional Liability:

Service providers may also want to consider adding professional liability to their small business insurance coverage. This type of insurance protects your business against malpractice, negligence and omissions, and errors. If you’re in a service business that requires you to carry this type of policy (like a physician, therapist, etc.) be sure to check with your professional organization’s governing body, your insurance agent, or attorney to ascertain necessary kind and coverage needed.

Business Property Insurance

This type of small business insurance protects your business property equipment, and business-related assets from a variety of losses, including damages caused by acts of nature such as fires and storms, electrical surges, and theft. You need to be aware that one size does not fit all.

There are different types of business property coverages, depending on your business needs. For example, a “business owner’s policy” can not only cover your own property, but that of your customers as well (i.e. if you repair motorcycles and their bike is damaged on your premises). You can also get additional insurance that covers contents, or lost income, or costs of operating from a temporary location. Be sure to read your policy carefully and understand it fully. Know the difference between a “replacement cost policy” and an “actual cash value” policy, and know which one you have. Also, if you rent or lease your business property, make sure you know if you’re covered under their property insurance, or if you need your own coverage. Don’t take anything for granted…know your policy(ies) inside and out, and make sure you are adequately covered.

Home-Based Businesses

Here’s the thing…one of the reasons we work at home (besides getting to work in your pajamas) is to keep overhead down. But unfortunately, your homeowner’s policy probably doesn’t cover any losses for your home-based business. According to the SBA, commonly needed insurance for home businesses include business property, professional liability, personal and advertising injury, loss of business data, crime and theft, and disability.

Workers Compensation

Even in the safest working environment, accidents happen. Which is why nearly every state requires employers to carry workers compensation insurance for their employees. This type of insurance pays for employee medical expenses and missed wages if they are injured while working on the job, whether they’re in the workplace or elsewhere, in an auto accident while conducting business, or if they contract a work-related illness. Exemption include - in most cases - business owners, farm workers, in-home domestic help, independent contractors, and unpaid volunteers. The cost for the workers comp insurance varies state to state, as do its governing laws governing provisions. Be sure to check with your insurance agent, or your state insurance governing board for the particulars for your state.

Key Person Insurance

This is essentially an insurance policy that your business would take out on a key person in the company so that it would be compensated for any financial losses resulting from the death or incapacitating illness of that person. You may want to consider this if there is someone in your company (yourself, your partner, other key personnel) whose absence would prove to be an insurmountable financial hardship.

Internet Business Insurance

A specialized insurance policy that has become increasingly popular over the last few years is internet business insurance. This type of coverage is designed to protect web-based businesses in case of damage done by hackers and viruses, and can also include things like electronic copyright infringement.

Business Interruption Insurance

Crime Insurance

Not something we like to think about, but crime in the workplace is always a possibility. And this type of small business insurance protects your company from loss of cash, securities, or inventory resulting from a crime. Crimes can include embezzlement, theft, malicious damage, vandalism, forgery, computer fraud, and other acts. These types of crime-related losses are usually not covered in most business property policies, so if this is a possibility in your business, you may want to consider this coverage.

Choose wisely.

There you have it. Small business insurance…if not made simple, at least explained. I hope this has been proved insightful and helps you formulate your own portfolio of coverage. Let me reiterate, however, that my advice includes getting with your insurance or legal professional to help you wade through these deep waters. Insurance isn’t something you want to find out you have too little of too late.

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