And as a small business (or any type of business) there will likely be some type of accident, whether it is personal injury or a fire. There are a lot of other events that you could be liable for in between, too. That is, of course, unless you have insurance for your property, your business, and your products.
What about the cost of insuring all the different aspects of your small business? Isn't it expensive? Well, it may be a little expensive, but imagine the costs you would incur should someone sue you for negligence or your building goes up in flames. These are problems that could potentially bankrupt your business.
In this article, we’ll break down the different types of insurance for small businesses, and also break down why you will probably need them at some point in your small business’s hopefully long, long future.
So, let’s begin.
Here are a few big reasons you should get your company, your property, and your products insured.
Anything and anyone that is a part of your business should be covered by some type of liability insurance (more on the different types of liability insurance later). Why? Insurance, just like homeowners’ insurance, protects you from fires and floods, to libel and malpractice. With any type of claim that is made within your company, insurance will help spare you the costs of lawsuits and liability claims, making it much easier to get your business back into shape after accidents or other unforeseen problems. Most important, though, is that you will be able to keep your business running throughout it all.
Insuring your property is the law. If you don’t abide by the law of the land, you could lose your business, and worse, face criminal charges. Ever heard of a cease-and-desist order? Law enforcement can slap one of those on you if your building or property isn’t insured. Property insurance can cost a bundle, but many places have minimum liability insurance, so make sure you know what exactly you need to stay legal.
So now that we’ve got that out of the way, let’s begin with the different types of insurance that are available to small business owners.
General liability insurance is used to cover all different types of legal issues stemming from accidents, injuries, and claims of negligence. This also covers and protects you against payments for bodily injury, property damage, medical expenses for your employees should they get injured, libel, slander (yes, libel and slander), cost of defending lawsuits, and settlement bonds or judgments that are required during an appeal procedure.
Got all that? Basically, this protects you against anything you think could possibly happen to your company. But, there are more specific types of insurance that you will need to consider, as well, depending on the type of business you own.
This type of insurance is used to cover companies that manufacture, wholesale, distribute, or retail a product. It protects you from financial loss because of a defective product that might cause injury or bodily harm.
To be clear, this will not protect you should an employee get hurt while making your product. That is covered under the general liability insurance.
The amount of insurance you’ll need depends on the type of business you own, though. For instance, if you own a hat store, the insurance costs will be a lot less than if you owned a large appliance company.
Ever wonder how all these companies that constantly have to recall products stay in business? – Great insurance policies. They’ve probably got pretty good lawyers, too.
PROFESSIONAL LIABILITY (aka Errors & Omissions Insurance)
This type of insurance is specific to companies that provide professional services. Let’s say you are a business consultant, for instance. Professional liability insurance will protect you against malpractice, errors, and negligence in services rendered.
Depending on the state your business is set up in, you may be required to get this. While this is usually required for doctors and physicians, there could be other requirements, I’d check with your state just to be sure (remember the whole law thing…).
Property insurance is required, but this type of insurance differs a little in that commercial property is for office buildings, industrial property, medical centers, hotels, malls, retail stores, farm land, multifamily housing buildings (apartments or condos), warehouses, and garages. Basically, this is any type of building or land that is intended to generate a profit.
Sound like you?
Commercial property insurance covers damages and loss that comes at the hands of anything from fires to vandalism.
It also comes in two forms – all-risk and peril-specific.
All-risk insurance covers a wide range of issues, except those that are explicitly stated in your policy. So be sure to read your policy. This usually covers risks for general small businesses.
Peril-specific insurance covers losses explicitly stated in your policy, but generally these are fire, flood, crime, and business interruption services. This usually covers businesses that are in high-risk areas.
HOME-BASED BUSINESS INSURANCE
So you’ve started a small business that operates out of your home? All the comforts of your home and none of the hassles that come with insuring a business… Nope. Typical homeowners’ insurance policies DO NOT cover home-based business losses.
Depending on the risk, you can add what are called “riders” to your homeowners’ insurance policy to cover normal risks like property damage.
But, of course, you will most likely need to add additional insurance policies, such as general and professional liability insurance.
So get out there, get insured, and watch your business grow without all the hassle that comes with worrying about how you’ll pay for problems that could happen in the future.
Lance Trebesch is the CEO of TicketPrinting.com & Ticket River which offers a variety of event products and ticketing services. After nineteen years of Silicon Valley experience, Lance found the key to happiness is helping customers worldwide beautify and monetize their events with brilliant print products and event services. Listening to his customers and learning about how they plan their events – ranging from concerts to fundraisers has helped him gain insight and expertise on how to host a successful event that he is always eager to share.