Sufficient business insurance minimizes your risks as a small business owner in the event that you are sued. An adequate amount of insurance will also protect you during a natural disaster or in the event that someone slips, falls or gets injured on your property.
Your state’s Department of Insurance sets minimum insurance levels that you are required to keep as a business owner. Limits, similar to state required auto liability insurance limits, are set in place to protect you and your customers. However, state required minimum insurance levels might not provide you enough coverage.
How Much Is Enough?
Liabilities that you are made responsible for in court that exceed your insurance coverage levels would have to be paid for out of pocket. A large settlement could sap your business of its profits, but the right types and amounts of business insurance could help to prevent you from experiencing this hard and painful lesson.
Depending on the type of business you operate, you will need certain types of insurance coverage. Typical business insurance coverage types include:
Home Business – Insures your property, income and material records. Coverage goes beyond what is included in your homeowner’s insurance.
Professional – Public speakers, authors, educators and other entrepreneurs and business owners who distribute information to consumers that could possibly contain errors or omissions could benefit from having professional liability insurance. It protects you against claims of malpractice and negligence.
Worker’s Compensation – This is required by state law. Businesses that hire employees should contact their state’s Department of Labor and Industry or Department of Insurance to obtain specific laws around worker’s compensation (e.g. when to file).
Product Liability – Retailers and restaurant owners might consider getting this insurance. Product liability insurance protects you in the event that someone is injured while using your products. The more hazardous a product, the more product liability insurance the business owner is encouraged to obtain.
Business Interruption – Covers the cost of income that is lost after a natural disaster, etc. Depending on the type of plan you get, business interruption insurance might also cover the costs of expenses that you must pay while you work to rebuild your company post a natural disaster.
General Liability – Because general liability insurance covers a broad range of situations, it is one of the major types of insurance that business owners get. Bodily injury, property damage, slander, libel and medical expenses are covered under general liability insurance. Court costs are also covered under the insurance.
Commercial Property – Should a fire, flood or other natural disaster damage your business property, commercial property insurance will cover the costs to have the property restored or replaced. Computers, records, loss of income and business interruption costs are covered. Commercial property insurance will also cover you in the event that your property is vandalized or destroyed during civil unrest.
Liability insurance offers business owners more than financial protection. Should you have to go to court and defend your business products, practices or services during a lawsuit, your insurance company will accompany you into court. Solvent insurance companies that employ claims adjusters and attorneys who have years of litigation experience will defend you vigorously; a win for you equals a win for them.
Work with a reputable insurance agent to decide on the right amount and types of insurance that you need. As small business expert Rhonda Abrams, author of the Rhonda Report, states, “Ideally, you want an insurance agent who understands business insurance for companies of your size and industry. It’s best if they’re a “broker” who can offer you policies from a number of different companies rather than just representing one insurance company’s products.”
