Small Business Insurance Basics: 10 Things You Need to Know Now

When you hear the words “business insurance,” you might think this only applies to large, established businesses. But in fact, this is an important topic for any sized business – from the largest corporations to the smallest, one-person operation and everything in between.

Whether you’re simply in the beginning stages of getting a business idea up and running, or already own an established business, it’s important to know a few basic things about how business insurance works, and what kinds you might need. Here are a few tips to get you started – or to provide you with a quick review.

1. Property Insurance – understand what it covers

Property insurance covers not only the physical structure which houses your business, but also the contents inside the structure. This could include equipment, office furniture and even inventory.

2. Liability Insurance is a must

No one likes to think about it, but getting sued is always a possibility for a business, regardless of its size. Having the proper amount of liability insurance is of the utmost importance. Liability insurance can help with expenses if your business is sued, but it can also help pay for expenses if anyone is injured due to a faulty product or service.

3. Worker’s Comp – check your state’s requirements

If your business has employees, it’s very possible that you’ll need worker’s compensation insurance. If anyone is injured on the job while working for you, worker’s compensation insurance will help pay for medical expenses. Most states require worker’s comp for all sized businesses, but be sure to check your state’s requirements to be sure that you get the proper type – and amount – of coverage.

4. Errors & Omissions

E&O Insurance is similar to Liability Insurance, but it is specifically for professional services businesses. This type of insurance can cover expenses that may be incurred due to accusations of negligence, or the failure to perform your professional services. Even if you haven’t.

5. Got employees? Consider EPLI

Employment Practices Liability Insurance applies to situations where businesses are sued for things such as discrimination, sexual harassment, or wrongful termination. At one time, these topics were only of concern to larger companies, but in today’s environment, businesses of all sizes can be subject to these types of suits. If your business has employees, it’s wise to consider adding EPLI coverage to your Business Owner’s Policy (BOP, described below).

6. Is Key Employee Insurance worth your while?

Many times, the success of a business relies on the involvement of specific employees. If one of those employees were to pass away unexpectedly, their absence could affect the profitability of the business. The beneficiary of a key employee policy is the business itself. Key Employee policies can often be requested by lenders, to meet certain credit requirements.

7. Cyber Liability Insurance is gaining in popularity

More and more business is being transacted online. And more and more data are being stored in “the cloud,” allowing for ease of access and reducing the need for companies to invest in storage or storage facilities. However, as more business is transacted electronically, the more that information is opened up to theft and hacking. Cyber Liability Insurance will help protect businesses if they experience a data breach; it will help cover costs ranging from legal expenses to public relations expenses.

8. Directors & Officers Liability Insurance is NOT the same as E&O

As the name implies, D&O insurance specifically protects the directors and officers of a company. D&O insurance protects the business, and sometimes the directors and officers themselves, in the event of legal action brought for alleged wrongful acts. While lawsuits such as these are less common in the United States, if your business operates outside the U.S. this type of coverage is definitely worth investigating further.

9. Don’t forget about the car!

If you have vehicles that are owned by your business, and are used exclusively for running your business, they won’t be covered by personal car insurance; a separate business auto insurance policy is needed. There are many types of coverage available, and auto insurance can sometimes be bundled into your Business Owner’s Policy. However, individual plans can be more easily customized.

10. Consider a BOP

A Business Owner’s Policy can be a great way to bundle common types of business insurance into one handy policy. BOPs are customizable, and can save you money since there are multiple types of coverage combined into one policy. Purchasing a BOP can also simplify the insurance process, since you’ll have just one policy, one renewal date, and one premium payment to deal with. While combining policies can be extremely convenient, it should only be done if you can truly have all of your insurance needs met by one product. If your business is of an unusual nature, or you have specific insurance needs, it might be best to still consider individual policies. Working with a trusted insurance agent or broker will help you ensure you’re getting all of your business insurance needs taken care of.

Protect Your Assets With the Right Business Insurance Coverage

A single spark can set a store on fire. A simple slip can lead to a long and expensive law suit. You can wake up the next day and your corporate car is not on its parking slot. If there’s one thing every business owner knows, it’s the fact that there’s nothing certain and it’s important to reduce risk to the very minimum.

Many business owners fall into the trap of not getting the appropriate business insurance coverage. Let’s dissect that statement further. It is not enough to ensure your business. Commercial business insurance should be your failsafe. Meaning, your business cover should be something that encompasses all possible scenarios.

Identifying All the Risks Associated with Your Business

The first step in determining the right business insurance for your enterprise is conducting a thorough audit of your entire business operations from start to finish. Make sure that no stone is left unturned. If you’re the owner, there’s a high probability that you may not be aware of everything that is happening in your daily business operations, so it is best to bring in all your managers as well as the key employees to ensure that you don’t miss anything.

Knowing the Different Types of Business Insurance

There are four major broad types of commercial business insurance.

The first category is probably the most common – business property insurance. Simply put, this type of insurance will give you monetary reimbursements, if your business properties (i.e. Your office, your machineries, etc.) were damaged or destroyed.

The second general classification of business insurance is liability insurance. If you injured a person or damaged a property during the conduct of your business, this type of insurance will take care of that. For example, if you’re a restaurant owner, and someone slipped within your restaurant because of a spilled drink, you can use your liability insurance to cover for the victim’s hospitalisation expense.

Third is the automobile insurance which is basically similar to your personal car insurance. It will cover the damages inflicted on your company-owned vehicles including those resulting from collision accidents.

Lastly, the umbrella commercial business insurance does not play a specific role. Rather, it extends the limits of your other insurance policies. It may also be used to cover other things beyond those which are covered by your liability, property and automobile insurance policies

Sufficiently Investing Towards Your Insurance Policies

By identifying all the areas in your operations that may cause financial losses to your company, you will be able to identify which types of insurance you need. Aside from selecting an insurance category, you likewise need to ensure that you are investing enough towards these business insurance policies.

For example, if you run a hotel business with several luxury cars to transport your guests, you should invest heavily on automobile insurance and the policy you should get should have a high premium. You can’t have a $30,000 BMW luxury sedan and just have $5,000 worth of automobile insurance.

At the end of the day, having the right business insurance coverage is your safety net if and when the worst case scenario turns into a reality.