Small Business Insurance: What Every Business Owner Should Know
As a small business owner, you face a certain amount of liability. Without putting the proper protections in place, you could be putting your business and/or personal accounts in jeopardy. One lawsuit could wipe out everything you’ve worked for years to build, whether that legal action is related to a personal injury in your store or an employment discrimination lawsuit placed by a job candidate. Before you proceed another day in your business, here are a few types of insurance available to you.
The primary protection you’ll need in place is liability insurance. Most business owners wouldn’t think of operating without at least general liability in place, but here are three types of insurance you should consider taking out immediately to protect yourself:
- General—General liability insurance covers a business against injuries and property damage that can happen to a business. As you seek funding and work with certain clients, you may find you’re required to carry general liability insurance the protects you and, as a result, them. However, general liability policies have limitations, so many businesses add product or professional insurance policies for additional protection.
- Product—Businesses that sell products can face a liability if their products should cause harm. A food manufacturer could cause food poisoning or unexpected allergic reactions, while a toy manufacturer could unknowingly ship a product that causes injury to children. Businesses can tailor product liability insurance to their specific needs for more coverage.
- Professional—If you provide professional or personal services to customers, professional liability insurance can protect you from legal action. This type of insurance can sometimes be referred to as errors and omissions insurance, since it is designed to protect businesses against legal action that arise as a result of accidentally leaving something out of a contract or agreement.
- Premises—Anytime someone steps onto your business’s property, you risk a liability, even if your business doesn’t regularly welcome customers. If a delivery person slips and falls on a patch of ice while navigating to your front door, you could face legal action. Premises liability protects you against an injury that occurs on your business property.
Employment Practices Insurance
Once you’ve hired your first employee, you elevate your business to a new level of liability. In addition to customers and on-property visitors, you now must take on a risk that one of your workers will file a claim against you. For that reason, employment practices insurance is recommended for any business that staffs workers. If you manage workers, you should consider:
- Employment Practices Liability Insurance (EPLI)—Once you realize all of the different types of legal action you could face as an employer, you’ll see the importance of EPLI. Ensure the policy you take out covers you for sexual harassment, discrimination, wrongful termination, breach of employment contract, failure to employ or promote, emotional distress, and mismanagement of benefits. Even if you feel that you would never engage in any of these activities as an employer, you should have protection in place.
- Workers’ Compensation—This type of insurance is likely required as a part of doing business in your state. If an employee becomes ill or injured while working for you, this insurance will cover the workers’ compensation they receive to cover injuries and loss of income. It will also protect you against lawsuits that claim your workplace conditions contributed to the injury or illness.
Property Insurance Coverage
Imagine all that you would lose if a fire broke out in your office or home? Of course, you’d have personal belongings that couldn’t be easily replaced, but consider the business items you’d lose, as well. Property insurance not only protects your business against property loss, but also lost wages that occur as a result of being closed due to your space being uninhabitable. If you own or lease space for your business, you’ll need commercial property insurance to cover the loss of property. This includes any retail space you lease or own, any warehousing or manufacturing space, and the items you house within those buildings.
Even if your business operates out of a home office, you’ll likely assume that your homeowners insurance policy will cover all of its contents. While your policy may cover your business property, there are often limits on how much of a home office your personal policy will cover. Check the amounts and determine if you need to purchase a separate policy to cover the belongings you use to run your business every day. You’ll also need to check to see whether your policy will help you with the loss of business use while you get your business running again.
Business Auto Coverage
If you run a business, you’re likely using your personal car for travel and claiming the mileage as an expense on your taxes. If so, you should check your auto insurance policy to see what stipulations apply to business travel. You may not be covered for business use of your personal vehicle. In some cases, you’ll need to switch to a commercial auto policy to cover your extensive business use. Even if your personal policy covers your current business usage, be sure you revisit it often to account for any changes.
Business Interruption Insurance
Natural disasters like earthquakes, tornadoes, and floods can put a business out of commission for months at a time. Many businesses can’t survive such a shutdown, especially if they rely on a physical location to serve customers. Business interruption insurance can cover the financial loss that hits your business if such an event should occur.
You’ve worked hard to build your business and all of that hard work can be wiped out by a disaster or legal action. The right insurance policy can keep your assets safe. Choose the right policy to fit your needs and price around to make sure you’re getting the best deal available for a business of your type.