Risk is part of the territory as a small business owner. This is true for every business, and specifically for those operating in California.
All states face their share of risk, for sure. But as we’ve recently seen with the California wildfires that devastated so many homes and businesses, some states face unique challenges when it comes to business preservation and risk management.
Take your pick from any of the looming disasters waiting to pounce—fires, floods, earthquakes, and even frequent auto accidents on our busy west coast highways...it can seem like there’s a catastrophe around every turn.
The truth is there are dangers and risks in every state, you just have to know which ones are most important to guard against in yours.
Proper risk management can be a life saver—not just a business saver—should you ever find yourself in the crosshairs of sudden disaster.
So how do you prepare for the worst?
It won’t come as a surprise that we’re going to recommend some insurance for your business. We are in the business of helping people protect their business, after all. What’ special about these recommendations is that they’re specifically relevant to California business owners.
Here’s the deal:
Why do small businesses need to worry about this more than big businesses?
It’s all about resources. Small businesses tend to run on a smaller budget, don’t have a big team of risk management pros backing up their decision making, and probably don’t have a million dollar credit line at the bank to get them through a rough patch.
You’ve got more at risk.
Determining the most important coverage for you as a California business owner is vital in protecting your future.
Think your shop or lemonade stand is too small to worry about insurance?
Who Needs to Worry About Small Business Insurance in California?
If you own a business with less than 100 employees that grosses less than $5 million annually, you’re a small business owner.
Freelancers and independent contractors? You’re in the mix too.
In fact, freelancers and home based businesses might have even more at risk than your typical brick and mortar establishment. Your personal assets may be on the line, and counting on your homeowners insurance to cover you professionally could be a tragic error in judgement.
If you work for yourself, you need to worry about the risks associated with being in business.
Must-Have Insurance Lines for California Businesses
While every small business is different, each should have minimum basic coverage as the foundation of their loss protection coverage.
Here are the basics...the bare minimum...the core insurance you must carry if you’re a business owner operating in CA.
This covers the business for any claims that occur against the business or its employees while conducting business activities. It could include everything from slip and fall claims to false advertising claims. General liability serves as a blanket in liability claims and will cover the legal costs associated with such claims and even the costs of any settlements.
Going back to the home-based business owners—don’t count on your homeowners insurance to cover the delivery guy who breaks his ankle tripping over the garden hose strewn across your front walkway...it’ll more likely be your business’s general liability policy that protect your personal assets in that unfortunate scenario.
This covers any property owned by the insured for conducting business including structures and contents. Its coverage can extend to inventory, raw materials, machinery, and computers and electronics.
Imagine a fire sweeps through your area and takes out your warehouse, or even destroys your car, which had your computer in it?
Or imagine, instead, the fire takes your office, which was attached to your showroom floor, and adjacent to your manufacturing facility. Your office furniture, electronics, machinery, inventory, and facility are gone.
Business Interruption Insurance
Pay close attention, because this one is not something most businesses consider.
Business interruption insurance: what is it?
This insurance covers your business in the event you can’t do business. It’s not to protect you from lawsuits or replace damaged equipment. It’s to cover you financially and replace the income you’d lose if you couldn’t conduct business for a period of time.
The recent fires in California are still a raw wound in our state, and highlight a sad reality—a lot of people have lost their businesses, homes, and possessions, and many face a huge income gap until they can get up and running again.
If your business was destroyed and you didn’t have business interruption insurance, how would you earn your living?
Home based businesses fall through the cracks in this category, because often self-employed individuals or freelancers don’t consider that their home is their office, and often, their personal computer is their lifeline to business operations.
The recent fires in California are a reminder of how critical this type of coverage can be. It can take weeks or months for businesses to file claims and restart their businesses following such a disaster. Business interruption insurance makes up for lost income during this period.
Is that it?
A simple Business Owner Policy (BOP) will cover most businesses to a fair degree, but other insurance lines exist to cover the extras, like cyber risk, or having employees on your payroll.
All of this can be bundled together and doesn’t break the bank...especially when you compare the cost to what might be lost if your business were to experience an unexpected loss.
Should Small Business Owners Be Scared?
Not if they’ve got coverage.
We aren’t in the scare tactic business, and certainly aren’t sending the message that every business is going to face an actual disaster, but it’s hard to ignore the real pain and suffering seen so close to home by so many small businesses in our state over the past few years.
The truth is this:
We don’t have a crystal ball—and neither do you. That’s why every small business (and by the way, we’re a small business too:) should be adequately insured; we just don’t know what’s coming.