Running a small business comes with inherent risks. Whether it’s a flood that destroys property, a customer filing a lawsuit, or an employee who gets injured on the job, it’s important to protect your company and personal assets with business insurance.
Insurance may be one of the least exciting things you have to deal with as a small business owner. However, safeguarding your business, your employees, and your livelihood should be an essential part of your business operations.
Business Insurance May be a Legal Necessity
Several factors determine what coverage you will need and what it will cost. Some insurance is required by law. According to the U.S. Small Business Administration, the federal government requires every business with employees to have workers’ compensation, unemployment, and disability insurance. Your employees are your most valuable asset, and it is imperative to protect them in the event of an accident.
States also may require additional insurance. For instance, some states require contractors to have general liability insurance in order to obtain a license. Be sure to visit your state’s website to find out what policies are relevant to your business.
Insurance may also be required by a client or business associate. For example, if you rent or lease your business facility you may need to carry insurance if the landlord’s policy does not cover it. Some clients may require a Certificate of Insurance (COI) to provide protection if something goes wrong on the job.
The Benefits of Business Insurance
Insurance is not simply a legal necessity – it can be a significant factor when prospective clients or customers are considering whether or not to do business with you. Customers typically want to work with a business that has the proper licensing and insurance. Carrying insurance shows that you operate a credible and dependable business and genuinely care that people are protected while at work. This may be especially critical when someone is hiring you to do work in their home or office.
Business insurance can also make it easier to recruit quality employees. Top talent will take into consideration the fact that health and safety is a priority for you. In fact, second to salary, job seekers look for benefits packages that include life, health, disability, and long-term care insurance. Providing the maximum amount of coverage you can afford will help you avoid losing a prospective employee to a company that offers better benefits.
Consider Your Coverage Options
Insurance coverage options are available to protect just about every aspect of your small business, from employee injury to natural disasters. Here are some of the most common types of coverage that small business owners need to consider:
- Property insurance: This is your best defense against loss from fire, windstorms, and other disasters. Coverage should include your store, office, factory, warehouse, or other facilities, as well as everything from computers and inventory to equipment and tools.
- Business Interruption: Many small business owners fail to think about how they will manage if a fire or other disaster renders their place of business unusable. Business interruption insurance compensates you for lost revenue if your company has to temporarily cease operations due to damage that is covered under your property insurance policy. It also covers operating expenses like electricity that continue when business activities come to a halt.
- Liability insurance: General liability insurance protects your business in the event a customer or other visitor is injured on your property. It also covers legal defense costs if you face a claim or lawsuit for any number of reasons, from your product or service causing harm to unfulfilled contractual commitments. There are a variety of specific liability options available, including Cyber Liability and Employment Practices Liability, so be sure to select the coverage that is right for your business.
- Commercial Auto Insurance: If you or your employees drive company-owned or personally owned vehicles during the course of doing business, you will need commercial auto coverage. Commercial Auto Insurance can get you and your employees on the road again quickly after an accident. It will also protect against losses from injuries to other drivers, passengers, and pedestrians for which you or your employees are liable.
- Workers’ Compensation: When accidents and injuries occur on the job, it’s important that the medical needs of your employees are quickly addressed and they return to work as soon as possible. Workers’ Compensation Insurance can cover your employees’ medical expenses and lost wages arising from work-related illnesses or injuries, as well as reduce potential lawsuits by current or former employees.
- Disability Insurance: For small business owners, a disabling injury or illness could be financially devastating. Several income protection options are available for business owners, including business overhead expense insurance, key person insurance, and bank loan disability insurance.
- Health Insurance: Quality health care is vital to you and your employees. Make sure you clearly understand your responsibilities under the Affordable Care Act, both as an individual and as an employer.
- Life Insurance: If you have family members who rely on your income, life insurance will provide the money they need should the unexpected occur. You also might consider insuring key members of your team who would be difficult to replace. Many lenders require you to have life insurance before giving you a business loan.
Review Your Policies Regularly
Obtaining the right type and amount of insurance to protect your organization and employees will help you avoid gaps in coverage where you need it most. However, keep in mind that your business needs can change over time.
Make it a priority to review your policies regularly to make sure your coverage continues to protect your assets fully. If you have moved to a new building, increased revenue, hired new employees, or added services or products, it’s possible your policies no longer fully cover you. Consult with your insurance agent to determine whether they should be updated.
Without business insurance, a single unfortunate incident could seriously compromise your business finances and put your personal finances at risk. Having the right insurance coverage in place will provide peace of mind for you, your team, and your clients – and allow you to concentrate on growing your business.
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