So you’re in business, congratulations! That is no small feat! Now that you’re here, let’s talk about the best ways to protect what you’ve undoubtedly worked so hard to build. Insurance. It’s not a fun word, no one likes to hear it let alone deal with it but deal with it you must. Add it to the list of things you need to do as a business owner that you consider the necessary evils (it’s kind of like being a grown up, isn’t it?)
Below is my summary of some of the types of insurance you may want to consider for your small business.
General Liability - No matter what type of business you have (even home based), you need to have liability coverage. This type of policy will cover damages if you, your employees, your service and/or your product bring bodily harm or property damage to another person or entity.
Professional Liability - Professional Liability Insurance AKA Errors and Omissions Insurance, provides defense and damages if you fail to, or improperly provide a service. Your GL policy will NOT cover this so it’s important to have both and know the difference. This type of coverage is applicable to anyone providing professional services including accountants, consultants, lawyers, real estate agents, hair salons, insurance agents, tech providers, even notaries!
Business Owner’s Policy - Affectionately referred to as a BOP, this plan packages all required coverage a business owner will need. It often includes Business Interruption Insurance, Property Insurance, Commercial Auto, and Liability, among other industry specific requirements. The benefit of a BOP is that there is usually a significant discount for purchasing many insurances together in a bundle (think phone, TV and internet).
Property Insurance - This may seem like common sense if you own the building you occupy but did you know that you should have property insurance if you own ANY business property such as computers, office equipment, tools, or inventory? This will protect you against fire, theft and even vandalism. Along with Property coverage, you may want to consider Business Interruption insurance as well which will protect your earnings in the event that you are unable to operate after one of the above incidents.
Commercial Auto Insurance - Along the line of protecting your property, make sure you have special Commercial Auto coverage on any vehicles used for commercial purposes. This includes vehicles that carry employees, equipment or products. If you do not have company vehicles and employees use their personal vehicles for company business, consider adding a non-owned liability policy in the event that your employee gets into a collision and doesn’t have enough (or any) coverage of their own.
Workers Compensation - This insurance provides wage replacement and medical benefits to workers who are injured on the job. In exchange for these benefits, the employee forfeits his or her right to sue the employer for the injury-causing incident. As the business owner, this protects you and your company from legal complications. State laws vary but all require you to have this coverage and if you don’t, the penalties can be fairly steep. NOTE: If you have 4 or less employees, you may be able to waive the Workers Compensation Requirement but speak to your attorney before deciding to do so.
Directors and Officers Insurance - This type of insurance protects, you guessed it, Directors and Officers against any actions that may affect the profitability or operations of the company. If said Director or Officer finds herself in a legal situation as a direct result of her actions, this insurance can cover costs or damages that result from a lawsuit.
Life Insurance - Sure you’ve heard of this (and hopefully have some) to cover your family or other personal expenses in the event of your early demise but what about Key Person coverage for your business partner? If he or she passes, you’re going to need time, resources and personnel to cover that loss. Key Person coverage can be purchased on both partners so that you ensure the business can go on: with or without you.
And on that morbid note, I think I’ll close out this segment on Insurance for your small business! There are other types of coverage you may want to consider so speak to your trusted insurance advisor and make sure you’re protected.