Business insurance provides financial protection for businesses against covered business risks. Any business, whether large or small, is prone to certain risks. A business dealing with car rental or carpooling services should consider getting their cars insured. This is as car accidents are likely business risks, and repair could be expensive. Insurance policies like commercial auto insurance provide protection for the business.
Business risks can be different for different kinds of businesses. A business that uses heavy machinery or chemicals during manufacture may consider getting their equipment insured. Meanwhile, a consulting business may consider different kinds of insurance, such as professional liability insurance.
Why do small businesses need insurance?
Without insurance in place, businesses can have to deal with various business risks on their own. This can come in the form of expensive legal battles, property damage leading to business disruptions, and more. If the risk is covered by insurance, then the business owner receives financial coverage up to the amount stipulated in the policy. Sometimes, this can make the difference between a business staying open and having to close doors.
Insurance can be a great, and sometimes necessary, investment for all businesses. It’s especially useful for small businesses, as it helps protect small businesses during times of need. There are also some insurance policies that may be legally mandated by the state. Many states in the US require businesses to have workers compensation insurance in place. This insurance policy is required even if the business owner only hires one employee. You may also have to consider getting unemployment insurance as well. This will depend upon the state through which you run your business out of, so poring through the legal obligations and guidelines for the state can help you.
Unlike large businesses and organizations, small business owners may not have the budget to recover from various risks. Having to pay large settlement claims in a lawsuit, for example, is more likely to ruin a small business over a larger one. With business insurance policies in place, small business owners can defend themselves against such risks. But what kind of business insurance should a small business owner opt for? Here are five kinds of business insurance policies for small business owners:
1. Business Owners’ Policy
This insurance package includes three of the most commonly needed insurance policies for small business owners. These include:
- General Liability Insurance: The most common insurance policy among small business owners, general liability insurance provides protection against certain scenarios. This includes scenarios related to bodily injury, property damage, or slander, done to the client or third party, by the owner or an employee. If a client slips and falls and breaks their leg in your office, they can sue you. This insurance policy protects your business in such scenarios.
- Commercial Property Insurance: This insurance policy protects the location from where you base your business. If you’ve rented or bought a commercial property for your business, and it gets damaged, then this insurance policy helps pay for the restoration. You can cover your commercial property against various kinds of damage, such as fire, water, and even vandalism.
- Business Income Insurance: This insurance policy protects your income during times when you can’t operate. If you can’t run your business, say due to bad weather, you can lose profit for the day. This insurance lets you recover your business income, up to the amount covered in the policy.
Getting a business owner’s policy is a great idea, as it gives you three types of business insurance that can help you protect your small business. You can also combine your business owner’s policy with other policies, as a way to tailor your insurance package.
2. Commercial Auto Insurance
If your business uses vehicles in any way, even if only to drive to meet clients, then consider this type of insurance. Commercial auto insurance is especially needed by car rental businesses and other businesses that require large numbers of cars.
If the car gets into an accident during the course of carrying out work, then this insurance policy can protect your business. So you won’t have to pay for expensive repairs to the car. Consider this insurance policy even if you only use one car for business purposes. Commercial auto insurance still ensures that you can easily repair that car if damaged or get it replaced.
3. Professional Liability Insurance
If your small business offers advice or professional services, then this insurance policy can become necessary. Also known as Errors and Omissions insurance, professional liability insurance covers against instances such as misrepresentation, malpractice, and others.
For some professions, like doctors and lawyers, this insurance is mandatory in certain US states. With professional liability insurance, small businesses can protect themselves when sued by a client.
Should a client find that the service professional they hired caused them to lose money, or negatively affected them in any way, then they can sue. Professional liability insurance pays for a small business in such scenarios when it comes to the legal battle and settlement. The amount provided is covered in the policy and subject to policy limits.
4. Workers’ Compensation Insurance
This insurance policy is legally mandated in most US states. Even if an employer hires only one employee, they will still need this insurance policy to meet their obligations.
Workers’ compensation insurance policy provides coverage for the employee should they encounter an accident, injury, or illness as a result of their work. Employees can sue if they get into an accident that leads to an extended medical stay. With this coverage, an employee’s medical bill, recovery, and partial wages are provided for, among others.
5. Data Breach Insurance
As businesses become increasingly reliant on the internet and technology, the potential for cyberattacks also increases. This insurance policy protects all data, including client data, that is available with a business. If these get stolen by a malicious party, then data breach insurance covers recovering data, informing clients that their data was lost, and more. Data breach insurance can be necessary, as risks such as losing clients’ data can lead to lawsuits.
Business owners need to consider what kind of business they own before they can decide on the right combination of insurance policies. Certain insurance policies are better suited to certain businesses, such as professional liability insurance for professional service providers. Some kinds of insurance policies may also be required in certain states in the US. If you want to learn more about what kind of business insurance policy is ideal for you, then click here.
With insurance policies in place, you can protect your small business against most business risks.