Key Insurance Options for Small Businesses
If you’ve filed an LLC for your company, you already have substantially more protection from your business structure than you would with a sole proprietorship. But have you thought about purchasing extra protection in the form of insurance? Each small business has different needs, and there are a host of insurance options available to business owners.
When you think about it in comparison, business insurance is very much like the insurance we all deal with as individuals. We carry life insurance, car insurance, home insurance, flood insurance…and some people even have an umbrella policy that protects items above and beyond the others mentioned. So what about your business? Listed below are some key insurance options for small businesses that you should consider.
1. Business Liability Insurance
This form of insurance is also known as “General Liability Insurance” or “Commercial General Liability Insurance.” This form of insurance can cover:
- Property damage or bodily injury: If you’re renting a space, this would cover expenses and damages if someone were to get injured or damage property that is not under your ownership. It also covers you if you were to injure someone or damage a third-party’s property.
- Medical payments: Covers payments that deal with a bodily injury you are legally responsible for.
- Defense costs: Covers the cost of an attorney to defend your company during a lawsuit.
- Personal and advertising injury: Covers your business if you are sued for slander or libel.
2. Property Insurance
When you own or rent a space for your business, you want to make sure all your assets are protected. Property insurance is used to cover the contents of a structure from theft or damage (wind, hail, smoke, fire, ice, snow, etc.).
Property insurance also helps cover your business should anyone (other than the owner) get injured while on the property. This form of insurance can include flood insurance, earthquake insurance, renter’s insurance or homeowner’s insurance.
3. Product Liability Insurance
Another insurance option to consider — depending on the structure of your business and the product(s) you sell — is product liability insurance. There is an inherent risk to using almost any product; even something as simple as a shirt can become a suffocation hazard. If you own a company selling nutrition supplements or other food/beverages, one of your ingredients could cause an allergic reaction to a consumer.
You could be at risk of a lawsuit in a situation like this. If the worst were to occur, this form of insurance could help protect your business and cover the costs to make things right. If you sell any type of product, liability insurance should be a top priority. And when your business and products expand, so should the coverage amount that you purchase for your policy.
4. Professional Liability Insurance
Professional liability insurance is similar to product liability insurance. Rather than protecting you from potential lawsuits due to products, this insurance covers you if your business involves services — such as consultants, engineers, accountants, attorneys, architects, counselors and real estate agents.
This form of insurance covers your business from negligence stemming from a professional service, regardless of whether the damage is actual or alleged. This type of insurance is also known as Errors and Omissions Insurance (E&O Insurance). There are some instances where you may need to show proof of professional liability insurance in order to have clients sign contracts.
5. Crime and Fidelity Insurance
Surely as a business owner you’re not naïve enough to believe everyone is honest — and some people have stickier fingers than others. In all likelihood, you’ll find some of your employees don’t have the morals you thought they did when you hired them. When this happens, crime and fidelity insurance becomes extremely important — especially when it comes to losses from employee theft, computer fraud, credit card forgery and destruction of property.
Unfortunately, no one is safe from dishonest employees. Not only do you need to find and fire these individuals, but you need to have the right insurance in place to protect yourself and your business.
6. Business Interruption Insurance
Business interruption insurance and property insurance tend to go hand-in-hand. While property insurance covers the actual property, business interruption insurance covers lost income from things like fire, wind, theft, etc. For instance, let’s say part of your building caught fire and isn’t usable, meaning you’re unable to conduct business and make sales. Or maybe the fire damaged products in inventory, which you were planning to use to fill orders and ship out to customers.
These are now considered losses. Business interruption insurance can help get you back on your feet by covering the lost income you would have earned. Additionally, if something happened to your property and the business needed to be moved or relocated, business interruption insurance would help pay for extra expenses like rent for the temporary location.
There’s plenty that can go wrong in business, but having the right insurance can help make sure you’re as protected as possible. For almost every other need, check out how Incfile can help. Our professionals can assist with managing your company’s needs when it comes to business taxes, Annual Reports, Registered Agents, and more.