If you’re a small business owner, managing time and money becomes more important than ever. While you balance the needs of your company and home life, it can be tough to feel like there’s enough of either at the end of a hard day.
Now imagine throwing a costly and time-consuming court battle into the mix.
Don’t think it’ll happen to you?
It’s the things you’d least expect that can take you down, like a customer who slips coming into your store during a rainstorm, or a seemingly innocent Facebook post that accidentally offends one of your followers to the point of legal action.
As your most valuable tools for success, you need to protect your time and money.
What’s the answer? Small business insurance, of course!
...but you already knew that.
The real question is, “How do I know what kind of business insurance I need?”
We’ve created this simple checklist containing the most common small business insurance products to help you review your company’s risk factors, and identify any gaping holes in your insurance coverage that could end up taking you down.
We’ll go ahead and check this one off for you, because every business needs general liability (GL).
GL is the bare minimum protection you’d ever want if you’re running you own business. It covers a lot of the “core” risks you might face in the course of your day-to-day operations, such as personal injury, property damage.
How does GL protect your business?
Claims covered by your general liability policy would be covered by the insurance company, not your business. Costs covered might include:
- Legal costs
- Court Fees
When we say everyone needs general liability, we aren’t being dramatic. We’re living in a litigious society, and even the most behind-the-scenes business owners, like writers and graphic designers need some kind of insurance as a safety net.
As the name indicates, this insurance protects any property your business owns. Buildings, fences, signs, and sheds, and any other structures are covered, as well as items you use to run your business, like office furniture, equipment, and machinery.
In some cases, coverage even extends to damage caused by fire and natural disasters, and can cover the cost of debris removal and cleanup.
Business Interruption Insurance
Are you covered in the event you can’t operate your business according to your regularly scheduled program?
If events beyond your control, such as a major grid malfunction, flood, earthquake, or other emergency prevent the running of your business, how will you earn money?
Business interruption insurance replaces your income if circumstances beyond your control shut your business down temporarily. It covers you while you manage the damage, and make the necessary repairs.
Business Owners Policy
If reading the prior 3 policy types and you find yourself thinking you need a combination of those, consider looking into a Business Owners Policy.
A BOP combines liability, property, business interruption, and potentially a few other coverages, into a singular policy for ease of use and premium discounts.
Got employees? You need workers’ compensation insurance.
In every state in the US (except Texas) your business needs to carry workers’ comp insurance to cover your employees, even if you only have one single, part-time employee working for you.
Workers’ comp is there to protect you, and your employees, in case someone is injured or gets sick while doing their job. Slips, falls, and any other accident could mean lost wages, medical bills, and other related expenses for your employee.
Workers’ comp helps cover those costs.
Your business benefits from carrying workers’ comp too, since you won’t have to worry about going broke over a costly injury lawsuit if an employee is injured on the job.
If you think you’re off the hook because you only use independent contractors and freelancers to help you get the job done, think again. The rules that determine whether a person is an employee or contractor can be confusing, and it’s common for small business owners to accidentally misclassify contractors and employees, which can result in extremely expensive consequences.
Just because you write up a contract calling someone an independent contractor doesn’t necessarily make them one. Understand the difference between an employee and a contractor so you can avoid trouble legal and financial pain.
Do you use your personal vehicle for work?
Many small business owners do, and make the mistake of thinking their personal auto insurance will cover them while they’re running errands for business purposes.
Your personal auto coverage only goes so far.
If you or an employee encounter an accident while driving during the course of doing business, your personal coverage won’t do much to protect you. 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.
All it takes is one distracted driver, texting teen, or hazardous object in the road to derail all your hard work if your business isn’t covered by commercial auto.
Other Business Insurance
All the insurance types listed here are the primary lines small businesses typically carry to cover their assets. But others exits to compliment and fill in specialty gaps in the broad spectrum business insurance types outlined above.
- Errors & Omissions (E&O)—for individuals in sensitive professional service industries, such as finance, law, and medicine. Protects against claims of inadequate work and negligence.
- Cyber Liability—protection against damages resulting from data breaches and other digital, cyber security, and privacy issues. Becoming increasingly more necessary as more companies transact business online and store customer information in their database.
- Umbrella Insurance—extra coverage above and beyond the maximum limit for traditional lines. An extra padding of coverage for your business.
While these insurance types aren’t thought of as the core products needed to protect against risk, they can be the costliest to overlook if you do need them for your business. If there’s any question in your mind, it’d be smart to chat with a broker who can help you sort out how much risk you face, and if your particular business merits extra coverage.
How many of the above business insurance policies do you currently carry?
If you’re looking back on this list and wondering if you might have some holes in your coverage, don’t wait. Ignoring the risks could cost you everything: Shore up your business defenses and make sure you have adequate insurance coverage for your business.
(Article originally posted 5/11/2016)