In an attempt to save capital, many small business owners may be reluctant to consider spending money on business insurance and other safety precautions. But the reality is that business insurance is in essence an investment on the future. The various business insurance products available protect not only the owner(s) of the business, but also secure all of the business’ working relationships including customers, creditors, and investors. With proper coverage, business owners avoid having to pay for all sorts of liabilities, from flood damage to litigious customers.
Which Kinds of Business Insurance Should Small Business Owners Consider?
There are many different types of insurance options available to the owners of small businesses. Each type of of plan is there to help cover a specific set of risks that a business might face- risks that are at times unique to the smaller company. There are six main types of business insurance that small business owners should consider. Here is a brief rundown of the major options:
Property Insurance. Property insurance is very similar to homeowners insurance and is one of the most universally important types of insurance for small business owners. Even if your business is based entirely online or if you rent office space instead of owning your building, property insurance can be essential. This insurance protects the buildings, structures, and contents of a property in cases of natural disaster, fire, or electrical surge. You can cover every item in your office, including equipment, carpeting and lighting fixtures. While not typically included, you can adjust your policy to cover theft and embezzlement. Business property insurance also pays for loss of income while the business recovers from damage.
Liability Insurance. Liability insurance will protect you if someone sues your business for negligence. It should cover personal injury and medical expenses caused by your business. This includes injuries that happened on your premises, and injuries caused by your products. There are three forms of liability insurance:
- Liability insurance protects the assets of a small business by defending the business and business owner against claims of defective or malfunctioning products.
- General liability insurance covers small businesses and their owners against legal claims for injuries, accidents, libel, or slander.
- Product liability insurance is for businesses that are focused on manufacturing, distribution, or retail.
Worker’s Compensation Insurance. Most states require businesses to purchase worker’s compensation insurance, which covers employees who are hurt on the job. Business owners benefit, because this insurance guarantees that workers cannot sue their employers for on-the-job injuries. Instead, they will receive regular monthly payments from the insurer.
Commercial Auto Insurance. If your business uses vehicles, you need commercial auto insurance. Personal auto insurance will not cover company cars. This insurance covers damage to the cars, and damage that the cars might cause to others.
Health Insurance. Business owners looking to retain loyal workers can offer a health insurance benefits package to their employees.
Life and Disability Insurance. Life and disability insurance protects the business in the case of the death or disability of vital employee. When properly executed, the proceeds and stipulations of the policy can create a smooth transfer of ownership or company interests among the surviving business partners and relatives.
Weighing the Pros and the Cons of Securing an Insurance Policy for Your Business
Obviously, there are some cons to obtaining small business insurance as a small business owner. Small business insurance and the protection that it provides come with a cost. The cost of the insurance is going to be based on a few factors: how large your business is, how many employees you have, and the nature of your business, among other things. The real question for small business owner, particularly those operating online, is whether the cost of the policy will outweigh the cost of the risk involved with not having insurance. To determine this, you have to think ahead and be knowledgeable about the risks inherent to running your business.
The biggest advantage to purchasing business insurance as a small business owner is protection and ease of mind. When things go bad for small businesses, it can be extremely hard to pull out of it on your own- and in fact many don’t succeed. Business insurance is designed to help business owners in their true time of need. It is in many cases a worthwhile investment for any company (online or not). Unexpected things happen every day, especially in the business world. Make sure you have done your best to be prepared for them.
Carol Wilson has spent a good majority of her life working for insurance agencies and calculating business insurance quotes—so if anyone knows a thing or two about insurance it’s Carol. But aside from sharing her knowledge to readers, she also enjoys sharing her thoughts and opinions on other business-related topics such as marketing techniques. She welcomes your questions or comments at firstname.lastname@example.org.