There Are Many Layers To Small Business Insurance.
Small business insurance is expensive, requires time to investigate, and may never pay off. After all, what is the chance a flood will wipe out your computers or a shelving unit fall on a client? Actually, the odds are pretty good that you will face a substantial loss at some point.
So what kind of coverage do you actually need when money is tight? The answer is heavily tied to what type of business you own. Below we’ll look at some key insurance products for small businesses and who needs them.
General Liability Insurance. Every business needs liability – it’s just a question of how much. Liability protects you from claims arising from injury or loss caused by your business, its products, services or employees. Your liability coverage defends against suits and or settles claims against your company. Whether a visitor falls down your stairs, a neighbor sues you for polluting the air with your coffee bean roaster, or a customer claims your product caused injury or loss, it is your Liability Insurance Policy which comes in to play. Most are written on a “per occurrence” basis rather than an annual basis (like your health insurance). Per occurrence is important because: if your food business creates an e coli outbreak, or you are forced to recall a product, you could end up with a rash of suits. An annual limit would be of little value if you have a hundred complainants.
Some businesses are at higher risk than others and, therefore, require more coverage. If you own a waterpark you’ll be buying a much larger policy than someone who edits professional journals. Remember that a suit which goes to trial could produce a verdict in favor of the complainant in excess of your policy limits – which means you must pay the difference between the verdict and the policy limit from other sources.
Property Insurance – This is another coverage you need at some level. If you own your building, you will have a policy which covers it. However, you will also need to insure your business property including equipment, inventory, furniture and fixtures, etc. from the possibility of fire, theft, vandalism, and other damage you may not have considered (sprinklers go off in the middle of the night and soak all the computers, a raccoon clan spends the night in your warehouse and destroys thousands of dollars of produce).
Commercial Vehicle Insurance – If your business owns vehicles you will require insurance which protects against collisions, damage, and liability by your cars, vans trucks and other vehicles owned by the business. Like your personal auto insurance, it covers bodily injury, property damage and you will choose specifics of coverage and limits. Virtually all states require coverage for commercial vehicles, whether it’s a car or a fleet of dump trucks.
If your employees use their own vehicles on company business you should investigate coverage for non-owned vehicles in the event of a serious mishap.
Worker’s Compensation Insurance – Worker’s Comp, as it is known, is mandated in all fifty states. This coverage provides protection for workers injured on the job or as a result of job-related activities. The policy provides medical coverage and wage replacement for your employees and, in return, they agree not to sue you.
This coverage is required for all employees who receive a W-2 from your business. The cost for your policy could vary widely depending upon the risk to the employees so a building contractor will pay a much higher rate than a business whose employees spend their days at a desk.
Errors and Omissions Insurance aka Professional Liability Insurance – Your general liability coverage will not protect you if a customer alleges you have failed to properly render professional service. An accountant, for instance, who improperly advises a client not to deposit sales taxes collected and, as a result, the client is sued by the State is failing to render the service for which s/he was hired. This coverage is typically carried by professional firms (lawyers, accountants, realtors, consultants) but should be considered by any firm who could err and damage the client, such as:
Salons (hair burned by chemicals?)
IT firms (crashed your client’s server?)
Personal Trainers (over trained your elderly client causing harm?)
Decorators and Designers (Went off the rails and client hates the results?)
Business Interruption Insurance – Should your business be forced to close due to circumstances beyond your control such as natural disaster, fire, government forces such as street closures, this insurance will cover the cost of continuing operation including;
Direct and Indirect costs per your previous financial statements
Cost of a temporary location
Other normal and reasonable costs
Business Owner’s Insurance – this is an umbrella policy which includes all or most of the insurance a business owner should need including liability, property, commercial vehicle coverage, business interruption, and others depending on the type of company. Typically the individual policies within it can be altered to suit your needs. You may want to investigate one of these policies to see whether it saves you money.
Insurance is a cost of doing business and, while expensive at times, it could determine whether you have a business or not in the case of a mishap. Consult with a variety of agents and brokers to ensure you are getting the best coverage for the dollar.