If you are a new small business owner, you may be wondering what insurance policies you need to adequately protect your business and what types of small business insurance are available. To optimize your spending, you want to secure only the coverage types that apply to your business with policies that provide the necessary amount of protection.
This guide will help you determine which insurance policies are appropriate for your small business. If you need additional help, our insurance experts at David Pope Insurance Services, LLC can help you figure out which coverage options are right for you.
Follow the four steps below to get the small business insurance you need to protect your company.
What kind of lawsuits, natural disasters and accidents may damage your small business? Consider the risks your company faces to determine which insurance policies may provide the best protection. Discuss the potential risks you may face with other small business owners in your area and industry.
If you need assistance determining what your company’s risks are, you can find information from the National Federation of Independent Businesses, which offers resources to help you assess your business’s risks and ensure you properly insure all aspects of your small business.
Trustworthy insurance agents can help you find the right commercial insurance policies that best suit your small business’s needs. Your agent can help you find the coverage you need that fits your budget. An insurance agent receives their commissions from the insurance providers they represent when they sell a policy. As such, it is essential to find an agent who will represent your best interests and not just their own.
Next, review the costs of each insurance policy offered to you. The benefits and prices can vary dramatically from policy to policy, so be sure to carefully compare the different benefits, terms and rates for each insurance offer, including the monthly premiums and coverage limits. You may also want to consider offers from multiple insurance agents to ensure you are getting the best deal.
When your business grows, your liabilities grow as well. If you expanded operations or replaced or bought equipment, you may want to speak with your insurance agent about the changes and how they might affect your coverage needs.
After you purchase your commercial insurance policies, they will need to be kept up to date. Any time you are making an important business decision, review your current policies and determine whether you need to make adjustments. You may also want to look into bundling if you have several types of insurance.
A commercial general liability insurance policy protects your small business in the event that a third party gets injured by your business’s products, services or property. Third parties may include customers, clients or vendors. Under general liability insurance, the types of losses that may be covered include:
The cost of general liability insurance varies by your business’s level of risk in the industry. Typically, the cost is several hundred dollars per year.
You are not legally required to purchase general liability insurance for your small business. However, we highly recommend purchasing it for your company.
General liability insurance is especially important if you are in an industry where accidents are more likely to happen, such as construction, manufacturing or landscaping.
Commercial property insurance protects your business’s equipment, inventory, office space and other commercial property against damage or loss. This insurance covers small businesses from incidents of fire, theft, vandalism and certain weather-related damages. Most commercial property insurance policies cover flood damage and damage from an accident, such as a burst pipe. Some policies may not cover natural disasters, such as tornadoes or earthquakes.
Consider your business’s location and the chances of certain types of disasters occurring in your area. If you believe natural disasters are likely to occur where your business is located, you may want to purchase specific coverage for that type of natural disaster for an additional cost.
You are not legally required to purchase commercial property insurance for your small business. However, commercial property insurance may be needed to adequately protect your company.
Though commercial property insurance is not required, it is crucial coverage for many types of small businesses, particularly businesses with brick and mortar locations. You may want to insure your small business with commercial property insurance if you have:
A business owner’s policy (BOP) is a type of insurance package that bundles business insurance policies, such as commercial property insurance and general liability insurance. BOPs can simplify the process of buying small business insurance and save you money. With a BOP, your small business will be protected against financial loss from incidents like theft, fire and customer accidents.
You may be required to obtain a business owner’s policy if you rent or own a workspace. Even when a BOP is not required, purchasing one is often a wise choice.
A business owner’s policy is useful for most small business owners, but particularly those who rent or own a workspace or home-based businesses.
Home-Based Business Insurance
What if you have a home-based business? Do you still need commercial insurance, or will your homeowners’ insurance provide the protection you need? If you have a home-based business, your standard homeowners’ insurance policy will not cover your business. In this case, you will need to purchase added coverage to ensure your home-based business is protected.
While you may not be legally required to obtain home-based business insurance, most home-based businesses need this additional coverage. You can ask your home insurance provider about purchasing a rider that can offer a small amount of protection for your equipment and liability.
If you operate your small business out of your home, you may want to purchase home-based business insurance through your home insurance provider.
Product liability insurance is coverage that protects against financial loss if your product is defective and causes bodily harm or injury. This type of small business insurance covers your product’s full life cycle. A product can become defective at virtually any stage of the process. For example, your manufacturer may improperly make the product or the packager may ineffectively package it. If this occurs, a customer may sue your company since it is your brand on the product’s label.
This is where product liability insurance comes in. Your small business can be protected if a customer sues your company because of a defective product. Product liability insurance can be purchased as add-on coverage to a general liability policy or as a stand-alone policy. Product liability coverage is also one of the most affordable types of small business insurance.
You are not legally required to purchase product liability insurance for your small business. However, product liability insurance may be needed to adequately protect your company.
If your small business offers customers a tangible product, you may want to consider buying a product liability insurance policy. Any business that manufactures, distributes, wholesales and retails a product can benefit from product liability insurance.
Business interruption insurance is add-on coverage to a commercial property insurance policy. This type of insurance protects your small business against lost income in the event that you experience an accident or property damage. If your location is destroyed in a fire, for example, you could lose a lot of income during the reconstruction process.
Business interruption insurance covers the loss of income that results from these incidents. Similarly, you may want to consider purchasing cyber insurance, which can handle your customer data if your business has an online component.
While business interruption insurance may not be required by law, most small businesses need it to ensure their business stays afloat and operating costs are covered if equipment or a building is damaged.
Small businesses that need a physical location for conducting business should have business interruption insurance. If you will need your income, employee payroll, taxes and mortgage or rent covered during a period of restoration, you may want to buy this insurance.
Commercial auto insurance provides coverage for company vehicles if an accident occurs. At a minimum, you may want a policy that protects your small business against third-party injury. Comprehensive coverage, on the other hand, will cover the vehicle in the event of an accident.
If employees use their own cars for work, their personal auto insurance will protect them if they are in an accident. However, if employees use their personal vehicles to deliver services or goods for a fee, such as delivery personnel, you may still need to purchase commercial auto insurance.
While you may not legally require commercial auto insurance, there are some instances in which your small business may need a policy.
Small businesses may need commercial auto insurance if any of the following are true:
You or your employees conduct services with a vehicle.
Essentially, any time you have employees operating vehicles in your company’s name, you may want to purchase commercial auto insurance.
Workers’ compensation insurance protects employees who experience work-related injuries. During an employee’s recovery, workers’ compensation covers:
For example, if an employee experiences an injury after a slip-and-fall accident, workers’ comp may cover the costs for their treatment and lost wages. Many injuries, illness and repetitive stress injuries are covered by workers’ compensation insurance.
Additionally, if an employee sues your business for a work-related injury, workers’ comp insurance typically covers the costs associated with defending the lawsuit. You can buy workers’ compensation insurance through a private carrier or broker. Some states offer state-run insurance funds that sell workers’ compensation insurance at regulated rates. You can reach out to your state’s workers’ compensation board or insurance department to get more information.
Depending on your state, workers’ compensation insurance may be required for your small business, particularly if you have employees. In most states, employers need to carry workers’ compensation insurance to protect employees who get hurt at work.
The requirement for workers’ compensation insurance should not be taken lightly, as failure to buy the necessary coverage amount may result in fines and criminal penalties.
Small businesses that employ individuals should have workers’ compensation insurance. If any of your employees suffer a work-related injury or illness, this insurance can provide your company and employees the essential coverage needed.
Professional liability insurance is also referred to as malpractice insurance or errors and omissions insurance. This small business insurance is typically associated with professional service providers, such as lawyers and doctors. For example, a doctor needs malpractice insurance to cover their costs if they face a malpractice claim and an ensuing lawsuit.
Of course, many types of small businesses may need errors and omissions coverage, not just doctors and lawyers. It can be possible for nearly any business owner to commit professional negligence. A web designer who does have a website ready on a client’s launch date, for example, is an instance of professional negligence. If a client loses a significant sum of money due to the negligence, they may sue for damages. When you have professional liability insurance, you can be protected.
You are not legally required to purchase professional liability insurance for your small business. However, professional liability insurance may be needed to adequately protect your company.
While professional liability insurance is often associated with lawyers and doctors, any small business that offers professional services may want to purchase professional liability insurance.
Disability insurance is coverage that provides employees with payments when they are not able to work due to an injury or illness. These payments are a percentage of an employee’s income. Unlike workers’ compensation insurance, an injury or illness does not need to happen at work or be work-related. For example, after a pregnant employee gives birth, she may receive disability benefits.
Both short-term and long-term disability coverage are available for employers to purchase, though short-term disability insurance tends to be more common. Short-term disability insurance covers employees for a certain period of time after they fall ill or become injured, while long-term disability insurance lasts until the policy’s stated expiration date or until the employee returns to work.
In some states, disability insurance is required for small businesses with employees. In these states, employers are required to offer short-term disability insurance. Even if your state does not require disability insurance for your business, this insurance can offer your employees peace of mind and give you a competitive edge as an employer.
This is a type of insurance that small business owners in any industry should consider purchasing. Even if you are not required by law to carry disability insurance, it can make your company more competitive to employees and provide them with the coverage they need in the event of a short-term disability.
Key person insurance protects your small business in the event that a key person, such as you or another key executive, becomes disabled or dies. When a key person at a small business is no longer able to help run the company, the impact can be significant. Your business may lose large amounts of income due to the loss of clients that key person brought and during the transition period.
Key person insurance can help stem these losses. With this type of small business insurance, your company will get a payout when a key person becomes disabled or passes away that will help keep the business afloat. To make sure your business stays durable and less reliant on one person, you may want to purchase key person insurance.
With this coverage, your company can pay employees, pay debts and hire and train your key person’s replacement. To determine the amount of coverage you need for your small business, you may want to consider who is essential in your business, how much time would be needed to replace and train your company’s key person and how much money the key person brings into the business.
You are not legally required to purchase key person insurance for your small business. However, key person insurance may be needed to adequately protect your company.
Any small business that has a key person should purchase key person insurance, particularly if the disability or death of a key person would have a significant negative impact on your company’s finances and operations.
Employment practices liability insurance protects your small business against claims of wrongful termination or employment discrimination brought by an employee. For instance, if your company faces a claim of racial discrimination, your employment practices liability insurance would provide coverage for the costs of the lawsuit.
The cost of employment practices liability insurance depends on your industry, level of turnover, size of your workforce and whether your company has previously been sued for wrongful termination.
You are not legally required to purchase employment practices liability insurance for your small business. However, with employment practices liability insurance, a small business may be more adequately protected.
Any small business with employees should have employment practices liability insurance. Though you may work hard to keep your small business’s working environment fair and equitable, this type of insurance is still essential.
The out-of-pocket expense to resolve a lawsuit with no insurance can be significant. Small businesses tend to be the most vulnerable to these types of lawsuits, as they often do not have a legal department or full-scale human resources team or the capital to cover such an expensive suit.
At David Pope Insurance, we understand small business owners’ insurance needs. We are a respected, family-owned insurance broker local to Union, Missouri. If you own a new business in Missouri and the surrounding areas, we can help you find coverage that is right for you.
When you select David Pope Insurance as your provider, we will help you find a great policy with an affordable premium. We complete quotes promptly, so request your custom quote from us at David Pope Insurance today.