Understanding the different types of business insurance and what you need compared to what you don’t is a long process for a small business. While small business insurance is essential for any business, it should not be a difficult, painful experience setting it up, nor does anyone want to over-insure themselves with what doesn’t apply.
In this guide exploring what insurance is needed for a small business, we hope to break down the misconceptions about small business insurance. Let’s help clarify how to customize yours.
Why Purchase Small Business Insurance
Lawsuits are time-consuming, stressful, and, most importantly, expensive. A business can be rendered bankrupt by a single lawsuit and/or pay hundreds of thousands of dollars, and sometimes more.
With insurance, you have an insurer ready to fight on your behalf and minimize the financial blow to your business, often fully protecting you and your business from having to pay out claims with your funds.
Small Business Insurance Broker
Most small businesses do not get enough insurance. They underestimate the value of their assets or assume certain types of coverage would never apply to them. Talk with an insurance rep. Find a small business insurance package that suits your company’s needs.
Compare quotes and negotiate. Ask about exclusions, deductibles, and liability limits. These points must be weighed when considering overall insurance cost compared to risk protection.
Commercial General Liability Insurance
If a business can only afford or gets one type of insurance, it has to be commercial general liability insurance. No matter what type of business you are, commercial general liability insurance covers bodily injury and property damage. This is a risk in all businesses, and this type of insurance is required.
Bodily injury assumes negligence as the cause of an injury. When someone is injured on your property, even if you are not directly responsible, a bodily injury claim may be filed against you.
Property damage is when you’re legally liable for damages to a third-party property. This could occur if you are repairing a customer’s product and it suffers damage in your possession or similar situations.
Business Interruption Insurance
Hurricanes, natural disasters, and events out of your control directly impact your business operations. These situations are covered under business interruption insurance, aiding you with business continuity in the face of some very tough circumstances.
After you’ve suffered a major loss, tapping into this insurance assists you as you cover bills, payroll, and expenses while you work your way back onto your feet.
Product & Service Liability Insurance
If you make products that are found to be faulty or that cause injury, this could result in legal trouble. Delivering a service that results in a financial loss to your customer could also result in a legal issue. Liability insurance exists to protect you in both situations.
Depending on the type of business you operate, either or both may be a selection to include in the small business insurance you arrange.
Product liability insurance protects you from legal and medical costs relating to faulty products, products that have caused bodily injury, products that have caused property damage, or if a product has caused illness, such as if the product you sell is a food or beverage.
Professional liability insurance, or errors and omissions insurance, is often provided to graphic designers, web designers, copywriters, consultants, accountants, IT technicians, financial advisors, and similar service companies.
Cyber Risk Insurance
A small business that does a lot of work with IT systems or online may want to opt in to cyber risk insurance. As hackers are targeting more small businesses, a data breach can have very serious legal consequences.
Cyber risk coverage will cover costs associated with a data breach or hack on your computer, network, or similar system.
Types of Insurance for Small Business
Here are the different types of insurance for a small business:
Equipment breakdown insurance
Equipment breakdown insurance will cover financial losses or replacement costs tied to equipment failure. This can cover everything from commercial ovens and kitchen equipment to industrial warehouse equipment and shops.
Commercial property insurance
Commercial property insurance protects your assets and property. It can pay out for business downtime and reimburse you for repairs and replacements of equipment, inventory, business furniture, computers, electronics, and more.
You are legally required to have vehicle insurance if you offer company cars and have vehicles registered with your business.
Crime insurance
Crime insurance protects a business should an employee steal funds or property, misrepresent your company, pose a security risk, or outright harm your business. If an employee or partner defrauds your company with crime insurance, you are covered in the event of losses.
Life insurance
Life insurance or disability insurance can prevent an entrepreneur from going into financial hardship should they not be able to work for health reasons or assist one’s family if the entrepreneur passes away.
