Choosing the Right Insurance for Your Business
Having your own business can be tricky, regardless of whether it's your own creation, a business you've purchased, or a franchise business. With so much on your shoulders, insurance might be the last thing on your mind.
However, it's essential to have the right coverage to protect yourself, your business, and your employees. As a business owner, you must know how to choose the right commercial insurance.
Business owners have a lot of responsibilities, from concerns about marketing and sales to scheduling and managing employees. Entrepreneurs must also consider customer service and cash flow worries.
Since you run your business, you probably are an expert at some aspects of daily operations. You might outsource other responsibilities. You may have a CPA or bookkeeper and an employee or contractor who does other routine tasks or cleaning.
Some small businesses now hire a social media expert or a marketing and advertising consultant. Some specialize in ad placement and the best timing and placement for the maximum return on investment.
What is small business insurance?
Small business insurance, also known as commercial insurance, protects your business's physical property, finances, and assets. If you experience a natural disaster, fire, or other loss, it can reimburse you.
Some small business insurance policies can also protect your business if you experience a data breach or if an accident results in an injury.
What does small business insurance cover?
There are several situations small business insurance covers, including:
Cost to replace or repair equipment damaged during a covered incident
Coverage for interruptions to your business accrues during a covered incident
Expenses from data breaches
Financial losses from theft
Liability coverage when an employee becomes ill or is injured on the job
Property losses due to natural disasters
Protection if claims are made against your business for the goods or services provided
As your business needs change, your insurance will probably change too. It is important to review your business needs and goals with your insurance agent or accountant every year or two.
Types of Business Insurance
There are some types of insurance that any business - especially a business with employees - will need to carry. Government regulation frequently requires some coverage. One is health insurance coverage for employees, which is optional for small companies.
Businesses must carry unemployment and worker's compensation. Many also offer some type of disability coverage. Workers' compensation insurance is legally required for many states and covers businesses when employees become sick or injured at work.
Requirements for these types of coverage can vary by business size and location. Insurance is also needed to cover the business itself. There are a variety of insurance policies commonly purchased by companies.
General Liability Insurance
In a small business, this type of insurance protects your business in case of an incident causing physical injury or property damages. It can also protect against legal and medical expenses due to injury or libel.
Product Liability Insurance
If your business makes or sells a product, product liability insurance helps cover legal costs if your business's product causes harm. This is called errors and omissions insurance.
Professional Liability Insurance
This insurance is like product liability insurance, but for professional services. Professional liability insurance covers businesses that provide services, like hair salons, barbershops, or massages. It helps protect against harm caused by services provided.
Business Income Coverage
Business income insurance covers expenses and losses that occur due to a covered incident, like a restaurant having to close because of flooding. You will be covered for your temporary loss of income.
Commercial Property Insurance
For businesses with physical property, this type of insurance helps to protect your business's property, equipment, and furniture against theft or natural disasters. Some disasters such as earthquakes and floods are not usually covered. You will have to add those separately.
Home-Based Business Insurance
This insurance is specific to businesses that are run out of the owner's home. Home-based business insurance is usually added to an existing home insurance policy and includes protection for business equipment and coverage for injuries to customers at home.
Business Owner's Policy (BOP):
This kind of insurance bundle is a popular form of insurance for small businesses. A business owner's policy combines general liability insurance, property insurance, and business income coverage into one policy, which can cut down on the cost of insurance.
Buying Business Insurance
When shopping for insurance for your business, you must carefully consider your situation and your particular business. First, if you live in an area with a high likelihood of natural disasters, you need to have excellent commercial property insurance as well as business income insurance.
You may want to talk with other business owners about their experiences with local insurance agents. You'll need to find a licensed insurance agent to help you be sure you are getting the coverage your business needs at the best price available. Shop around, compare rates, and talk with several insurance agents.
Alexandra Arcand writes and researches for the legal and insurance advice site, FreeAdvice.com. She is an insurance expert and third-generation member of the small business community.