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What Types of Business Insurance Do You Need?
There’s nothing quite like starting your own business, even if it’s a small or micro business. It’s exhilarating to see your company name on your new letterhead and business card, submit proposals to potential clients and start earning an income for work that you’re doing. Above all, you realize that all the hard work and effort that you’ve put into nurturing your idea for your own business is finally coming to light.
It’s the same with growing an existing business. After all, you’ve worked hard and put in lots of hours and effort to get to the point where expansion is a consideration. That may include adding an employee, moving from a home office to a rental office space, or adding new services to your current business offerings.
Minding Your Own Business
If you’re considering starting a business, you’re certainly not alone. Statistics show that over 51% of new business startups in the country are people working from home.
If you’re just starting out, you’re going to need to face the realities of managing your new business and working on your own. That might include negotiating a lease, managing payroll if you have employees, and making sure you’re protected with the right insurance coverage. Because for small business owners, entrepreneurs and self-employed individuals, the question no longer is “do you need business insurance,” but rather, “what types of business insurance do you need?”
Here’s why: the last thing you’d want is for your business to be liable for some type of damage and find that you don’t have the proper insurance protection.
There’s another consideration: as the business owner, you are the business. And whether you’re starting a business, growing a business or taking over a family business, if something bad happens, you don’t want to expose yourself to potential liability. Without proper insurance coverage, that’s exactly what will happen.
Small Businesses are Booming
If you’re planning on starting your own business, you’re not alone. 52% of all small businesses are home-based, and about 22 million small business owners are self-employed with no additional employees.
According to the Wall Street Journal, small businesses continue to be the lifeblood of our economy, and only 1% of all businesses are publically traded. Currently about 120 million people work for a small business — that’s more than 50% of the workforce.
And a Wells Fargo survey of 600 small business owners showed that 66% ranked their financial situation as good, while 71% stated they expected their business to be in good financial shape in the coming year.
Different Business Insurance Options
It doesn’t matter if you’re renting an office, have a retail store or you’re working from your home office. According to our insurance experts at NASE, you need to have the proper coverage in case of any problems. So let’s take a look at the many different types of business insurance you’re going to need.
Health insurance — this one is a “must-have.” You’re no longer on a company insurance policy, so if you become ill or injured, you’ll need insurance. In addition to health insurance, you might want to also consider disability insurance, so your income will continue if you’re unable to work.
Liability insurance — another “must-have” insurance to protect you from any type of damages in case you, an employee if you have one, or even your product or services cause any type of injury or property damage to another person.
Business insurance — this is a broad term, and provides different types of coverage. The types of insurance you’ll need may depend on how many employees you have, the type of business you own and the type and amount of assets you’re looking to protect.
Business Owner’s Policy — often called, “BOP” this type of policy covers property and liability. The term, “property” includes your building, equipment and inventory, if you have any. It also provides liability protection for bodily injury, property damage or even a lawsuit from an accident that ends up causing bodily injuries. Some policies also cover claims from liable, slander or false advertising.
Professional Liability Insurance — this coverage picks up where a Business Owner’s Policy leaves off, covering you in case of professional errors or negligence. It’s designed specifically for the self-employed. If you’re the business owner or run a small business you may want to consider an “errors and omissions” policy. This is especially important if the type of work you do includes providing advice or services that people rely on, like a CPA, an attorney, engineer, business consultant, financial advisor and many other professionals.
Workers’ Compensation Insurance — if you have 2 or more employees, the law requires you to have Workers’ Compensation Insurance, and each state has different requirements. It’s designed to cover medical care and replaces a portion of lost wages for an employee who becomes injured during their employment.
Property Insurance — if you work from home, you may need additional property and liability insurance - more than is provided by your homeowner’s policy. In fact, some homeowner’s policies exclude business liability. Let’s say someone comes to your home for a meeting, or to pick up something. If they receive an injury while visiting, your homeowner’s policy would probably not cover the liability. At the very least, you should consider beefing up your current homeowner’s policy, but discuss this with your insurance agent.
Data Breach and Cyber Liability Insurance — by now everyone has heard of the breaches against Equifax and Target, and the resulting damages the companies are still facing are in the hundreds of millions of dollars. Data breaches and cyber thefts are happening to businesses of all sizes. While cyber insurance policies differ by the insurance company and the policy, you want to be covered for legal fees, the costs involved in incident investigation, costs of notifying clients, cost or restoring compromised data and other costs. These costs can add up to substantial amounts of money!
The National Cyber Security Alliance states that one in five small businesses will become the victim of a cybercrime each year. If your business handles sensitive data, you may want to consider adding a cyber insurance policy to your coverage. But some insurance policies that cover errors and omissions may cover data losses. Before buying, check with your agent. And if you’d like to see some of the things you can do to protect your small business from cyber thieves, here’s an informative article to read.
There are other insurance considerations as well. For example, if you use your vehicle for business, or you have an employee that uses his or her vehicle, you may need additional auto liability insurance. To protect yourself, it’s best to discuss this with your insurance agent.
Cover Your Assets!
Hopefully you’ve learned why it’s critically important to protect your small business by having the proper insurance coverage. What you’re really protecting is your personal assets, because if your company is liable for damages to a third party, chances are they’ll be coming after you. A well thought out insurance program will help to mitigate any potential loss to your personal assets.