2016 Small Business Insurance Checklist

Business owners are a rare breed; independent, risk-taking entrepreneurs who know what they want and how to get it.

If you are one of these intrepid entrepreneurs, it’s more than just a business to you. It is the culmination of your efforts, your dreams, and your plans for the future. And whether you run a small sandwich franchise, an e-commerce retail website, or provide a financial service for your clients, your business is in danger. Because every accident, incident, and act of nature is an opportunity for a lawsuit or monetary loss that could bring down everything you have worked so hard to build.

Luckily, you can easily defend your business from risk with the right business insurance coverage. So you can keep blazing ahead, building your future.

Business insurance can cover just about every aspect of your company, protecting you, your business, and your assets from unexpected (and costly) events. From an unintended auto accident, to an unhappy customer, to an injured employee, business insurance defends against the risks that could close your doors permanently.

Think you are too small to need coverage? Think again. There is not a single type of business, or a company so small, that it can’t suffer a loss from an unexpected risk. If you offer a product or service to another person, you need protection.

Here are the business insurance policies that you simply can’t afford to ignore.

General Liability

The foundational insurance policy that every business owner or independent contractor should carry is general liability coverage. General liability protects you from third-party lawsuits in the event someone believes they have experienced injury, bodily damage, or property damage as a result of your business. In today’s litigious society, any small accident or incident could result in a lawsuit.

A 2005 SBA report, The Impact of Litigation on Small Business, uncovered the following risks when a business is sued:

Legal costs for litigation averaged anywhere from $3,000 to $150,000.

Small businesses felt they had to recoup litigation costs by cutting operating expenses.

Many owners felt payment of damages nearly put them out of business.

The median time spent dealing with litigation was 8.7 months.

A general liability policy for your business can cover the costs of a lawsuit that could cost your business in legal fees, lawyer’s fees, settlements, judgements, and even the high price of business interruption. Mostly you’ll be out some sort of deductible, but that’s a lot better option than tackling the issue with your own checkbook. Lawsuits happen, but with general liability they don’t have to cost you your business.

Workers’ Compensation

Do you have employees? Even a single, part-time worker means your business needs workers’ compensation insurance. Workers’ comp is there to protect you, and your employees, in the event someone is injured or becomes ill while doing their job. A slip, a fall, or an accident could mean lost wages or costly medical bills for your employees.

Workers’ comp will take care of these costs, which means you don’t have to worry about an injury lawsuit. Providing workers’ comp insurance is not only the right thing to do for your employees, in most states it is also required by law.

If you pay independent contractors or freelancers to help you get the job done, be careful. In many instances, your contractors may actually be misclassified employees. Just because you write up a contract calling someone an independent contractor doesn’t make them one. Knowing the difference between an employee and a contractor can be the difference between audits, fraud, and big fines.

Commercial Auto

Your personal auto coverage only goes so far. But don’t expect it to cover you if you (or an employee) is involved in an accident while driving for work purposes. It could be as simple as dropping off a forgotten tray of food to a catering customer in your own car. Or letting your employee use your vehicle to make a coffee run.

When you or your employee gets in an accident with a distracted driver, texting teen, or some other hazard on the road while driving for your business, you need commercial auto coverage. Because that personal auto coverage you thought was covering you… isn’t.

Commercial Property

Do you own or rent the building your business uses for your day-to-day operations? Either way, commercial property insurance is your key to defending it. If you rent, commercial property can protect the stuff that’s inside your building, such as equipment, furniture, materials, and supplies. If you think your landlord’s insurance is covering your stuff, then you have a huge hole in your coverage!

If you own the building you operate out of, you have even more reason to carry commercial property coverage, which covers the building itself as well as the stuff inside it. No one ever plans for a fire, busted pipe, storm damage, theft, or vandalism. But with commercial property, your business won’t have to pay the price for damage or loss to the place and things you need to operate.

Errors & Omissions

What does your business provide? It is a service, a product, or advice? Whatever you offer to clients, there is always a chance that they could be left unsatisfied. And that’s where Errors & Omissions (E&O) coverage steps in.

Also known as professional liability insurance, E&O protects you from a client or customer who feels that your business failed to provide the promised service, made mistakes, was negligent, gave bad advice, or simply didn’t meet their standard. With E&O, you don’t have to worry about how you will defend yourself against a customer’s sense of wrongdoing. Instead, you can get back to work, knowing your policy will cover your legal and defense costs.

Cyber Liability

Hacks happen. Data breaches can hit even the biggest corporations, with the largest budgets for cyber security. And data breaches can happen to the little guys, too. Even something as simple as losing a paper file containing a client’s personal information, or having your laptop or tablet stolen from your vehicle, opens you up to a serious risk to your financial stability. Cyber liability insurance will protect you from the high costs associated to a hack, data breach, or losing sensitive customer information.

Business Interruption

You are waiting on a shipment, but an extreme storm on the other side of the country has shut down all shipping options. You can’t get your materials, supplies, or much needed inventory to you by train, plane, automobile, ship, or teleportation (you tried). In the meantime, you are losing money because you don’t have what your customers want.

Business and supply interruptions can be the largest, and most costly, risks that you face. Business interruption claims are generally even higher than property damage claims, meaning you could be facing losses in the millions if you have to pay for rent, salaries, taxes, and loan payments without any income coming in. If you have business interruption coverage, your cost is only a deductible. Without this coverage, however, you will need to pay for this all out of your own pocket.

How many of the above business insurance policies do you currently carry?

Chances are, you may have just discovered some holes in your protection. A weak spot in your defenses. When you have worked so hard to create a business out of nothing, walked away from the security of a 9-to-5 and opened yourself up to the risks (and rewards) of entrepreneurship, you want to protect your business completely.

Don’t ignore a policy that could cost you everything: shore up your business defenses and make sure you have adequate insurance coverage for your business.

Smiling Female Contractor

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