Insurance is a constant of American life, and it should come as no surprise that your new small business requires insurance. After all, if there are so many financial risks to cover in your personal life, how many more are there in your professional life? You’re going to be dealing with far more people than you do as a private individual, having an impact on their lives whether intended or not.
There are actually quite a few different types of insurance you may need for your small business. Some are industry-specific, but most are necessary for the majority of small businesses.
A general liability insurance policy is crucial for any small business. General liability covers any accidents that occur to an individual or their possessions on account of your business. A slippery floor that leads to a customer slipping becomes your liability. You will have to cover medical costs as well as damages to something like a smartphone.
For companies that sell products that come with risks, you can get the insurance that covers damages caused by your products. General liability insurance does not cover employees, which we will discuss further in workers’ compensation.
General liability insurance only covers accidents that occur to individuals on account of your business. It does not cover errors you make that cause losses to clients. This is where professional liability insurance comes in. It pays out claims made against your company for such errors. For example, if your legal firm makes a mistake in a document that leads to a client losing a claim, you can claim from professional liability insurance to pay them back.
Some industries have their own professional cover – especially industries which deal with life-or-death situations. If you own medical practice, whether treating physical or mental health, you will need to get the insurance that covers mistakes that cause permanent or even fatal damage.
Small businesses can see their income halted by damage caused to the business’s property. This leads to financial losses not directly related to the cost of rebuilding. If you are out of business for long enough, you may be unable to pay for rent, employees’ wages, and your own salary. Business income coverage will pay out claims for income lost in an accident.
General and professional liability cover anything that happens to your clients (or other individuals who happen to visit your premises). However, you need workers’ compensation insurance to cover your employees for injuries or illnesses they pick up because of the job. This could be a sudden accident, in which a person gets badly injured by equipment or a condition that occurs due to their job that builds up over years. An employee who gets chronic knee problems due to heavy-lifting duties can claim workers’ compensation from you.
Workers’ compensation insurance is compulsory for businesses with employees in most states.
Of course, you also need insurance that covers your assets, including your property, equipment, and cars. Commercial property insurance will cover damage that happens to your offices and anything else you use to operate. Commercial auto insurance covers damage to your business’s cars, as well as any bodily damage caused to you or your staff.
Similar to gap coverage, commercial umbrella insurance is necessary to cover claims which exceed what specific policies cover. While you may not want to pay extra to cover something that is already mostly covered, umbrella insurance can save you from having to halt business because you cannot afford to get back up and running.
Modern times have introduced brand new threats to businesses. Data breaches are one of the most common and feared threats. A data breach could lead to your customers’ data being stolen by hackers. This may not directly impact your business’s income, but it needs to be dealt with by any business that takes responsibility for clients’ privacy. Data breach insurance pays for PR damage limitation, along with credit monitoring services for clients.
Even the most responsible employers can face liability in case of mistreatment of employees. You may inadvertently discriminate against certain employees, or one employee may sexually harass another employee. You may end up firing someone for what seems to be a reasonable reason but turns out to be misguided. Employment practices liability insurance will pay out their claims against you.
You don’t need to get each of the above policies individually. A business owner’s policy (BOP) combines general liability, commercial property, and business income insurance. It is extremely popular among business owners and will save you the trouble of looking for individual policies.
Make sure your small business is insured. Without the right insurance, you may lose your business due to incidents that you could not have foreseen.
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