Any small business, regardless of industry, niche, or location should always take steps to protect itself from the unexpected. Different options are available for small business owners when it comes to insurance, but what are they?
What do each of them provide and what kind of insurance do you need for your small business?
Business owners can opt from one to over a dozen different types of insurance. Since some insurances are covered more than others, it’s important to take the time to research, weigh options, and choose wisely to ensure your business is fully covered.
After all, you’ve worked hard to start your own business. Whether you own a home-based or a brick-and-mortar store or company providing products or services locally or globally, you need to protect your investment.
Below you’ll find the most common types of business insurance that can help benefit and protect your small business.
General Liability Insurance
Every business, whether you run a home-based business or large company, should be covered with the general liability insurance policy. General liability insurance, also commonly known as business liability insurance or commercial general liability insurance, helps cover your business from claims of customers or others that are a result of accidents or injuries. Claims of negligence can be costly for businesses to cover without insurance. Many forms of general liability insurance covers property damage, bodily injury, libel, slander and defense against lawsuits
Commercial Property Insurance
If you have general liability insurance, do you also need commercial property insurance? The simple answer is yes. Commercial property insurance provides coverage for buildings (property damage) or personal business equipment, products, supplies, inventory, office equipment, computers, and so forth. Property insurance coverage also protects against theft, vandalism, and fire.
Workers’ Compensation
Small business owners with employees should be familiar with workers’ compensation insurance. For most businesses, insurance for workers’ compensation is mandatory coverage for medical expenses and lost wages for employees injured on the job.
Workers’ comp, as it’s commonly known, is a type of insurance that provides certain benefits to an employee injured on the job, such as medical and wage replacement.
Workers’ compensation insurance protects employees and employers and is a must if you have W-2 employees. Be aware that fines are applicable for non-compliance. Check with your state Department of Labor for requirements and exemptions.
Professional Liability Insurance
Does every small business need professional liability insurance?
It depends on what you do and what type of service you provide. Professional liability insurance is also known as “Errors and Omissions insurance” or E&O insurance. This type of insurance policy is designed to protect small businesses in the event you are accused of negligent performance of professional services. Professional liability insurance is a recommended option for any business that provides professional services or gives advice.
Professional liability insurance is beneficial in a personal injury (slander or libel) suit or a case of alleged negligence and also helps with defense costs.
It’s important to be aware that personal liability insurance doesn’t cover property damage, false advertising, bodily injury, or fraudulent or dishonest practices.
Business Owner’s Policy (BOP)
Known as a BOP, business owner’s policies or packages typically offer coverage for several types of insurance a business owner might need, such as general liability insurance, business property insurance and business interruption insurance. In some cases, small business owners can save money by customizing and/or bundling services in a business owner’s policy.
Depending on the insurance company policy, coverage may also include against merchandise spoilage or damage and business interruption but be aware of eligibility criteria and read the fine print. BOPs are also known as “named-peril coverage”, meaning that the policy will only cover damages that are listed in the policy, such as vandalism, damage caused by Mother Nature, fire, and so forth. Some agencies may also offer “all-risk” coverage.
Note: The Small Business Administration (SBA) urges small to mid-size business owners to perform risk assessments in order to more precisely choose levels of coverage. Ask about vehicle coverage and flood insurance, as well as the potential for add-on coverage components.
Be aware that BOP does not cover workers’ compensation, medical or health insurance, disability insurance, or professional liability.
About Business Auto Insurance
A common misconception among small business owners is that commercial auto insurance only protects and covers damages to cars, vans, and trucks that are specifically marked with logos and used for transportation of employees, equipment, products, or services.
What about personal vehicles that your employees use for company business? In such cases, non-owned auto liability insurance also protects your company in the event that your employee has inadequate coverage and is involved in an accident. In some cases, non-owned auto liability insurance can be added to a business owner’s policy.
Other Types of Small Business Insurance
While the above types of business insurance are recommended for most business needs, other business insurance is available. Among them include:
- Insurance policies that provide protection against data breaches and losses. Such policies are commonly called cyber liability insurance or cybersecurity
- Small business owners operating out of their home should be aware that homeowner’s policies do not cover home-based businesses. This is where home-based business insurance comes in. According to the Small Business Administration, a rider can offer protection for a small amount of business equipment and liability coverage for third parties.
Bottom Line
Don’t take chances on your business, or employees. Business insurance can offer small business owners peace of mind in the event of an accident, injury, or natural disaster.
