End Goal: Know which insurance you will need and where you will be getting it. #
Insurance is often overlooked by small business owners. It is an extra expense and is only really needed if something disastrous happens. Most small business owners are already gambling on themselves starting a business so someone might think
“What is a little more risk going without insurance?”
If you need insurance and you do not have it or you don’t have the right kind of insurance that is typically the end of your business. Do not skip on the insurance. Some of these are a must have. Others are more optional depending on your situation and business needs.
In this step we just have a couple tips in navigating the world of insurance and a list of common types of insurance that you may or may not need.
Tips: #
- Find a local insurance agent. There are a handful of people who will help you with your small business that you want to have the ability to meet in person. Your insurance agent is one of them. Along with your banker, accountant, and attorney (should you need one).
- Make sure the local agent is an Independent Insurance Agent. Do not use someone from a national company like State Farm, All State, Geico, etc. These insurance agents are great for your personal home or car, but not what you want for your business. You want to find an independent insurance agent who can get quotes from a wide range of companies.
- Research the companies that you receive quotes for. While your insurance agent will handle most of the work, you want to be confident in who you are using and make sure they are a good company who pays out when they are supposed to.
- It is possible to go broke over-insuring. You want to have a good balance of
insurance vs. risk, do not get so much insurance that your premiums are making you go broke. Work with your insurance agent to come up with an acceptable level of risk.
Types of Insurance: #
Commercial Property Insurance – If you own a location or building that you are operating a business out of, this is an absolute must. This insurance protects you from fire, natural disasters, or any physical damage to your property. If you have a mortgage on your property, it is likely required that you have it in place.
Renter’s Insurance – Also called tenant’s insurance is needed should you rent a space for your business rather than own it. It will help protect against any damages to the business property.
Inland Marine Insurance – This protects your equipment and property. While commercial property and renters insurance cover damages to the building, this covers your equipment and business personal property.
Business Owner’s Policy – Often times insurance companies will offer a Business Owner’s Policy that has several different types of insurance rolled into one package. This is usually a good starting place for small businesses. It will include Liability Insurance, Crime Insurance, Business Interruption Insurance, and premises coverage. Look into this as a starting point for your business.
General Liability Insurance – Sometimes called Business Liability Insurance, this is a must for almost every small business. This type of insurance protects companies from common lawsuits arising from everyday business activities. It can protect you from bodily injury, property damage, medical expenses, medical payments, product liability, and other common mishaps or
accidents that occur at your office, store, or job site.
Crime Insurance – This is commonly built into Business Policies, but it specifically protects you against theft that may occur at your business. An absolute must for workplaces that have a lot of customers coming in, but good even for offices to protect against robberies.
Business Income Insurance – Also called Business Interruption insurance helps replace your business’ lost income if you cannot operate due to property loss. This will help to cover other costs of your business while you have to be closed for repairs.
Product Liability Insurance – If you are manufacturing a product, this is likely a type of insurance you will need. This will protect you from any liability caused by a faulty product because of poor workmanship or design.
Workers’ Compensation Insurance – Another must for businesses with employees. This covers the business against injuries to your employees that are hurt while working. The rates differ widely depending on your injury, office workers being pretty inexpensive while construction or hazardous workers being the most expensive. Again, this is a must if you have employees. A
business must cover medical bills, lost wages, rehabilitative services, and even death benefits to a worker hurt at their job and this insurance covers all of that.
Commercial Auto Insurance – If your business includes transporting goods, traveling to different job sites, or any work related activity that requires driving, you may need a commercial auto insurance policy. Your personal auto insurance may not cover you if you get into an accident
while performing activities related to your business. It can be a big shock to most people when their personal insurance denies coverage.
Commercial Umbrella Policy – This policy helps to cover additional costs that exceed the limits of a business’s other liability policies like general liability, commercial auto, or workers compensation. It will help cover things like, legal fees, medical bills, property damage, as well as judgments and settlements. Your insurance agent should tell you if this extra layer of protection
is necessary depending on the risk level of your business.
Malpractice Insurance – This type of insurance is pretty specific to professional services by a healthcare professionals, legal professionals, technology professionals, and marketing professionals. This is necessary to protect against mistakes or damages caused by negligence.
Professional Liability Insurance – This covers a business who provides professional services from mistakes. An architect who makes a mistake on a blueprint or an interior decorator failing to match a paint swatch correctly. If you provide a professional service then this is an insurance you will need.
Errors and Omissions Insurance – E&O Insurance is a specialized liability protection against losses not covered by traditional liability insurance. It protects your business from claims if a client sues for negligent acts, errors, or omissions committed during business activities that result in a loss for the client. This is good for accountants, notaries, consultants, real estate
agents, or any professional where a simple mistake or omission may cause damage to a client.
Employment Practices Liability Insurance – If you have a lot of employees, it may be good to have this type of insurance. It specifically covers businesses from lawsuits dues to issues with employees like discrimination, wrongful termination, and harassment.
Directors and Officers Liability Insurance – This is for larger companies who have a C-Suite of executives. It protects the company against lawsuits against your C-Suite level employees.
Helps to cover defense costs, settlements, and other costs associated with a lawsuit directed at the officers, directors or their spouses.
Key Man Policy – If your business operations center around a single employee or manager then this is a must. This covers you and your business should something unforeseen happen to this Key Man and your business is no longer operational or cannot sustain itself.
Building Ordinance and Law – This is a less known type of insurance that covers the rebuilding or upgrading of property to meet current building codes. For example, if you have a very old office building and part of it is damaged, it may not be fully up to building codes so you cannot just repair it back to what it was under the current laws. You need additional funding to upgrade the building to comply with new laws. This insurance is very useful for older buildings, historic buildings, or buildings in areas with strict building codes.
