Running a business is risky, so it’s essential that you protect both your company and personal assets. One important tool is insurance. Here are five types of business insurance worth considering no matter how small your business is.
- Property Insurance – If a mishap occurs at work, this policy protects your office and the assets inside it. An “all risk” policy covers losses from theft and physical damage caused by fire, vandalism, accidents, or acts of nature. It protects the building that houses your business and the items inside, such as equipment and inventory. Consider a “replacement cost” policy, which compensates you for the current costs of replacing your property, compared to an “actual cash value” policy, which replaces costs minus depreciation for past wear and tear. Depending on your location, you may also want to add flood or earthquake coverage. If you work from home, don’t assume your business is covered under your homeowner’s policy — it may not offer enough financial protection to cover your work-related equipment.
- Liability Insurance – Hopefully, you will never be sued, but just in case a customer has issues after using your services or someone takes a spill in your office, this is an essential policy to have. It protects you if you’re held responsible for damage done to other people’s property or injuries suffered by customers. The policy should pay your legal fees, settle claims, and pay damages. If you make or sell products, focus on “product liability” insurance coverage in case someone is injured as a result of using your goods. If you’re a service-based business, get “professional liability” insurance. Similar to a doctor’s medical malpractice insurance, it is protection in case a customer charges you with harmful neglect or critical mistakes.
- Business Interruption Insurance – Even if your business is halted by a major catastrophe, life goes on… and so do all the expenses you have to pay as the boss. Business interruption insurance pays your bills, payroll and other fixed costs if you’re forced to shut down for a period. Similar to disability coverage, this insurance ensures you still get paid based on the profits you would have earned during that time. While business interruption insurance is not sold as its own policy, you can add it onto your property insurance or an overall business owner’s policy.
- Commercial Auto Insurance - If you’re a road-warrior business owner, such as a caterer or construction contractor, you definitely need this insurance for yourself and any employees driving your vehicles for company purposes. But even for sole proprietors using the family minivan, if you’re driving it for business-related tasks, a commercial auto policy is a business insurance requirement in many states. Like your personal auto policy, commercial auto insurance provides coverage for liability, collision, comprehensive, medical payments, and uninsured motorists. But you may need higher liability limits based on the nature of your work, like transporting heavy goods or using the vehicle to conduct a service.
- Workers’ Compensation Insurance – If you have employees working for you, many states require that you offer them “workers’ comp” insurance. It gives benefits to employees who are injured or on the job or fall ill from work-related causes. Every state has specific laws about how companies should comply, and most list workers’ compensation as a business insurance requirement. Sole proprietors and partnerships usually aren’t required to have workers’ compensation, but read your state’s statute to make sure you’re in compliance and aren’t charged a penalty if you don’t purchase a policy.