Some people start and run a business to have another source of income, while others do it mainly to pursue their passion or interest. Whatever the reason is, there's something rewarding and fulfilling about running a business, regardless of size or the products or services being offered.
As an entrepreneur, you obviously already know that it also comes with several risks. You may think you've thought everything through, but the reality is, accidents can still happen — to yourself, your clients or customers, and even to your property and business assets. Another thing to remember is that untoward incidents can result in significant financial losses. Claims and liability lawsuits can happen when you least expect it.
So, how can you protect yourself and your business against these claims? One ideal way is to buy small business insurance.
If you have life insurance and home insurance, you might as well keep your business covered by carrying insurance. It protects you against claims due to personal injuries or damage to property while doing business. It also serves as your security blanket, giving you some peace of mind that through the bad times, your business will stay afloat.
Small Business Insurance Policies to Consider
The world of insurance can be intimidating, and, in most cases, your operations will need more than one type of policy.
How can you choose the right insurance products for your business? Here are the different types of small business insurances that you may want to consider adding (or may be required to add) to your portfolio:
- General Liability insurance - If a third party (e.g., customer or client) files a claim against your business due to bodily injury, your General Liability insurance will be your weapon against huge financial losses. It also covers claims against damage to property. Bear in mind that even if you run your business at home, you will still need to carry this type of insurance.
- Professional Liability insurance - If your business involves giving consultations or professional advice, it is wise to add Professional Liability insurance to your portfolio. This policy protects you against damages due to claims that you failed to render your professional services properly. Insurance agents, lawyers, architects, accountants, and real estate agents are some of the professionals who need this policy.
- Employment Practices Liability Insurance - Employment Practices Liability Insurance (EPLI) provides coverage for claims made by employees, former employees, and potential employees alleging discrimination, harassment, wrongful termination, and other employment-related issues. Although it’s not a legal requirement for a company to have EPLI insurance, it may be a good idea given the rising volume and costs of employment practices litigation.
- Workers’ Compensation policy - What about the people who work for you? Make sure that they are covered with a workers’ compensation policy. With this insurance product, they will receive compensation, as well as medical benefits, in case they sustain injuries while doing their job. It’s a best practice to make sure that contractors who work for you have workers’ comp coverage as well.
Generally speaking, employers are required to provide workers’ comp coverage to all employees. Bear in mind that the state(s) where your business operates may have specific laws and regulations about this type of policy, so make sure to check the applicable requirements. Also, even if you’re a sole proprietor, you may still need to carry this policy if you’re working with contractors or freelancers.
- Commercial Property insurance - Damage to property can be brought about by different causes including fire, theft, and vandalism. Protect your business property, tools, and pieces of work equipment with property insurance. In case something unfortunate happens and you cannot operate, having business interruption insurance will be of great help.
- Commercial Auto insurance - As the name suggests, it provides protection for the vehicles used for business purposes, whether to transport employees or products or to visit a client or customer. Vehicular accidents can happen so make sure to have commercial auto insurance to protect the business against claims due to damage to another vehicle or collisions.
- Directors and Officers (D&O) insurance - Those who are in the upper-level management of business have huge responsibilities to ensure that the company is running smoothly. But, if there are claims wherein their actions negatively affect the operations, they may face financial losses. You can prevent this by carrying D&O insurance.
- Cyber Liability insurance - In this digital age, security and privacy of your clients and customers are crucial now more than ever. That is why it is important to carry cyber liability insurance if your business involves maintaining a database of sensitive or private information. Cyber liability insurance mitigates data breach and other cyber incident risk.
- Business Owner's Policy - This is a combination of several insurance products that meet the different needs of a business. In most cases, this policy carries property insurance, business interruption insurance, crime insurance, liability insurance, as well as commercial auto insurance. Instead of buying policies separately, you may want to consider purchasing a business owner's policy instead, not only as a cost-saving measure, but also for convenience.
Related Article: Does My Business Need EPLI Insurance?
Protect Yourself and Your Business
We can’t stress it enough — as an entrepreneur, make sure to keep yourself and your business protected against significant financial losses due to claims or lawsuits by having adequate insurance coverage. Depending on the needs of the operations, you may need more than one type of insurance product.
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The key is to know the potential risks that your business may face at any time and choose which type of policy best meets your coverage needs. Don’t think of insurance as an additional expense. Instead, think of it as a wise investment. In the end, it’s all about having everything you need to protect you against leaving a huge dent to your finances.
It is better to consult a reputable insurance agent who has the knowledge and experience, not only about insurance but also about the industry you belong in. In this way, they will be able to explain which types of policies you should consider adding to your portfolio. And don’t be afraid to ask about anything that you don’t understand.
You can likewise ask friends, family, and fellow entrepreneurs about their insurance. They will be able to share their insights about must-have policies and even give you tips when it comes to consulting an insurance provider.
CoverWallet is a tech company that makes it easy for businesses to understand, buy and manage insurance — all online and in minutes. The company provides everything from general liability to directors & officers to commercial auto, and everything in between.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.