Running a small business is risky. You likely have money tied up in property and inventory that you could lose to a natural disaster or some other catastrophe. An employee could get hurt and need workers compensation. A customer could get hurt and bring a lawsuit against your company. You need business insurance to protect your investment in your business and provide your employees with their rights under the law.
But what business insurance coverage do you need? Some coverage is required by state or federal law, while others might not be required but could be a good idea, depending on your level of risk. Understand the different types of business insurance, so you can decide which coverage you really need.
Workers Compensation, Disability, and Unemployment Insurance
If your business has employees, you’re going to need to buy workers compensation, disability, and unemployment insurance. You have to pay into your state’s unemployment insurance fund to help cover the cost of unemployment benefits for your employees. Workers compensation and disability insurance will help cover medical expenses for injured workers and reimburse them for their time lost from work as they recover.
General Liability Insurance
Every business should have general liability insurance to protect against lawsuits. General liability insurance will pay for your legal defense and can cover your settlement costs, if it comes to that. It can also cover medical expenses for the person suing you, if they have any.
Commercial Property Insurance
Commercial property insurance covers your company’s real estate – like your warehouses, storefronts, or offices. This kind of insurance generally includes coverage against damage done by certain causes, such as a fire or a lightning strike. Some causes, like flooding, may not automatically be included, but you may be able to add a rider onto your policy.
Professional Liability Insurance
Professional liability insurance is necessary if you think customers will be able to sue you for incompetence in your job. People in the medical profession typically need professional liability insurance to protect them from malpractice suits, for example. Other industries in which professional liability insurance might be a good idea include construction, information technology, professional services, and transportation and logistics.
Home-based Business Insurance
If you run your business out of your home, home-based business insurance can provide the limited amount of coverage you need to protect your business equipment and protect you from liability. Home-based business insurance provides some coverage for a limited amount of equipment, and some third-party liability coverage in case a customer gets hurt on the premises.
Product Liability Insurance
If you’re selling your own products, product liability insurance might not be a bad idea. If you release a faulty product that harms your customers, you could be vulnerable to a lawsuit. Product liability insurance will provide the funds you need to defend yourself and bounce back.
Business Owner’s Policy
A business owner’s policy combines all the most common coverage options that small business owners most commonly need into one policy. This is the best business insurance coverage for many small business owners, especially those who run their companies from home.
Cybersecurity Liability Insurance
Forty-three percent of cyber attacks target small and medium-sized businesses. Many small businesses don’t recover fully from a cyber attack and end up closing their doors forever not long after. Cybersecurity liability insurance can help cover the costs of recovering from a cyber attack, including the cost of restoring your company’s data, repairing your reputation, and improving your cybersecurity.
Business Interruption Insurance
The COVID-19 pandemic showed many small business owners that they do in fact need business interruption insurance that can pay off if they have to stop doing business for a period of time due to a covered cause. If your business is forced to close by, say, a natural disaster, business interruption insurance can cover your payroll, reimburse you for lost revenue, and help you pay your rent, bills, and taxes while you’re working towards resuming normal operations.
Commercial Auto Insurance
If you have company cars, you need commercial auto insurance. It will provide the same kind of coverage for your company vehicles as your personal auto insurance provides for your personal vehicle. That can include repairs to the vehicle or the other driver’s car, medical expenses, and damage to vehicles due to theft or other causes.
As a small business owner, you need the right insurance coverage to protect your business assets. Consider the risks your company faces, and buy the policy that’s right for you.
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