Essential Insurance for Small Businesses
If you own a small business, you’ve invested a lot of time and money in making it a success. And that may have included some big personal sacrifices to get it up and running.
But how much time have you taken to secure the right insurance? Even if you procured enough insurance when you launched your business, it may no longer cover you. Small operational changes can create new liabilities. For instance, have you added delivery services, employees, online payments or consultation services? Many small-business owners think they’re covered, only to discover that they have coverage gaps when they need insurance the most.
In this month, we’re highlighting eight essential insurance policies for small businesses.
8 essential insurance policies for small businesses
Commercial property insurance
Commercial property insurance protects your business’s physical assets from unexpected events, like fires, windstorms, theft and vandalism. It covers your building’s structure and your belongings, like furniture, equipment, and inventory. However, it doesn’t cover perils like floods, earthquakes, equipment breakdowns, employee lawsuits or employee theft. Nor will it cover your business vehicles. You’d need separate policies for those risks.
Business interruption insurance
If a fire, theft or natural disaster covered by your business insurance were to temporarily shut down your business, would you be able to pay your bills? Think rent, payroll, utilities and other monthly expenses. Business interruption insurance compensates you for lost income if your business is forced to close during a covered event.
General liability insurance
General liability insurance protects your business if a customer or third party sues you for bodily injury, property damage, or personal or advertising injury. For example, say it’s raining and your reception area is wet. A client slips and falls, and decides to sue you for bodily injury. In this case, your general liability insurance would help pay for your legal defense and any resulting settlements or judgments. But if your employee slips and falls, that’s not covered by general liability. You’d need workers’ compensation insurance for that.
Workers’ compensation insurance
If one of your employees gets injured on the job, workers’ compensation insurance will pay for lost wages and medical benefits. It will also protect you from being sued. In most cases, the injured employee relinquishes their right to sue in exchange for benefits.
Almost every state requires businesses to have workers’ compensation insurance, so you need proper coverage to be in compliance. We can explain the laws in the states where you do business.
Equipment breakdown insurance
If a power surge, electrical short or mechanical failure takes your essential equipment out of commission, you might face substantial losses. Equipment breakdown insurance can help cover the cost of repairing or replacing the damaged equipment. It may also compensate you for any resulting inventory spoilage.
Professional liability insurance
Professional liability insurance differs from general liability insurance, which responds to bodily injury, defamation and property damage. Professional liability protects you against claims of negligence, errors and omissions, or mistakes you or your employees make while doing business. It’s not just for lawyers or doctors; anyone who gives advice, makes recommendations or provides a service can be sued. It covers your legal defense, such as attorney and court fees, and financial losses from settlements or judgments.
Here’s an example of when professional liability insurance would apply: Say you’re a freelance photographer hired by a couple to shoot their wedding. On the day of the wedding, you mistakenly delete several photos from the memory card, including critical moments of their ceremony. You offer a reshoot, but the couple sues you for failing to deliver the professional service they paid for. They cite negligence and emotional distress over the loss of their wedding memories that they can never recreate or get back. In this example, you’d need professional liability insurance to respond, since you made mistakes (accidental loss of photos) in your professional services and contractual obligations.
Now imagine the couple fell during a photography session at your studio, resulting in a sprained ankle and damage to the wedding dress. In this case, your general liability insurance would cover the physical injury and damage to the dress.
Commercial auto insurance
Personal auto insurance won’t cover your business operations; you need a commercial or business auto policy for that. Commercial auto insurance protects any vehicles your company owns. It covers different damages and liabilities, depending on the kind of protection you buy. We can explain the different levels of protection, including:
- Liability: Responds when you cause property damage or bodily injury to others, such as in a traffic accident or collision with a building. It does not cover damage to your vehicle.
- Collision: Helps pay for damage to your vehicle.
- Comprehensive: Protects your vehicle against events not involving a collision, such as floods, theft or hail.
- Hired and nonowned auto: Extends protection to vehicles not owned by your business, such as rented, borrowed or leased vehicles. It also covers you if your employees regularly drive their personal vehicles for business purposes.
Cyber liability insurance
All businesses that collect, store or process consumer data need cyber liability insurance. While you might think this type of policy only applies to large companies, it doesn’t. Hackers target small businesses because they often lack robust cybersecurity. If your business falls victim to a phishing scam or ransomware attack, a cyber liability policy can help with:
- Notifying customers about the breach
- Providing free credit monitoring for affected customers
- Paying state and federal fines
- Mounting a legal defense if you’re sued
- Rebuilding your computers and systems
- Recovering ransom payments
- Replacing lost income due to business interruption (with added business interruption coverage)
- Repairing your damaged reputation
Bundled insurance for small businesses
Many small businesses purchase a business owners policy (BOP) to satisfy their most basic coverage needs. A BOP combines the following coverages into a single policy:
- Commercial property insurance
- Business interruption insurance
- General liability insurance
You may need to complement your BOP with other coverage for full protection. For example, you may need to add flood, professional liability or cyber liability insurance. But a BOP is still cheaper than purchasing each coverage separately. And it helps streamline your insurance, so you have fewer policies to keep track of.
Call for a coverage review
We can review your current coverage against your risks and liability exposure. We’ll recommend a tailored insurance package that helps protect the business you worked so hard to build.