Small business owners need to be aware of all the types of insurance they should consider for their companies. The list is long, but it’s worth getting an expert opinion on what your industry requires.
Property insurance covers the cost of repairs, replacement and loss of property. Property insurance can be purchased for a single item or for a collection of items. It’s usually included in a business owner’s policy (BOP), which is a larger package of business insurance depending on the type of business you run.
General Liability Insurance
General liability insurance is one of the most important types of small business insurance. It covers damages to third parties, injuries to employees, lawsuits and property damage. Business owners should buy a general liability policy if they have any risk of getting sued.
- General liability can also cover the following.
- Legal expenses (going to court)
- Defense costs (the cost of hiring an attorney)
- Court costs (fees associated with going to court)
- Punitive damages (damages awarded in addition to compensatory damages).
Business Interruption Insurance
Business interruption insurance can help you get back on your feet in the event of a disaster. This coverage pays for the costs associated with starting up again after your business has been temporarily closed due to natural disasters, fire, malicious destruction, terrorism and even employee strikes.
If you’re unable to operate due to a covered event like this, business interruption insurance will pay for expenses such as the following.
- Employee wages
- Supplies and materials necessary for startup operations
- Utilities (gas, electric)
The important thing about business interruption insurance is that it covers all of these things only when they’re lost or damaged by an insured event—not if they’re stolen or otherwise taken away by someone else.
That’s why it’s different from property protection; while both protect against physical damage (to the building itself), only one protects losses related to lack of access!
Commercial Auto Insurance
Commercial auto insurance is required by law for businesses that use vehicles to transport goods or people to and from a business location.
The coverage provides liability coverage if you cause an accident, regardless of whether you’re on the clock or not. Commercial auto insurance also protects you from lawsuits in which customers sue your company due to injuries sustained while riding in one of your vehicles.
Commercial auto insurance can be purchased for a single vehicle or multiple vehicles, depending on the type of business you operate.
Like other types of business insurance, commercial auto liability policies come with different levels of coverage; most businesses should consider purchasing $1 million worth of primary limits per occurrence and $3 million total aggregate limit on their commercial auto policy.
Workers’ Compensation Insurance
Workers’ compensation insurance is a type of insurance that covers medical costs and lost wages for employees who are injured on the job.
Most states require businesses to carry workers’ compensation, but it’s important to check with your state’s department of labor to make sure you’re complying with all of the regulations. Employees who are injured on the job are entitled to workers’ compensation, so if your business is required to carry this type of insurance, you’ll need to pay for it.
However, some states allow employers to opt out of this requirement by self-insuring their workers’ comp obligations instead—that means paying claims directly instead of hiring an outside company like State Farm or Allstate Insurance Company (or whatever other big name insurer) as an intermediary between your business and its employees.
Cyber Liability Insurance
Cyber liability insurance is a relatively new type of coverage that can be an essential part of your small business’s insurance portfolio. Cyber liability insurance protects you from the costs associated with a cyber-attack or data breach, including:
- Repairing damaged hardware and software systems in your business
- The cost of hiring consultants to repair or replace those systems
- Paying fines if your business is found to have been at fault for failing to protect customer data
Professional Liability Insurance (errors & omissions)
Professional liability insurance is a form of legal coverage that protects you from lawsuits filed by clients who claim that they’ve suffered harm due to your negligence.
For example, if a client finds out that you had an undisclosed conflict of interest in a case you were handling for them and sues for malpractice or failure to disclose, professional liability insurance will cover the cost of their attorney fees and any other damages awarded against you as well as any legal defense costs incurred by your business.
Professional liability policies are generally required by law in many fields where mistakes could have serious consequences, like healthcare or legal services.
Most Types of Small Business Insurance Are Very Affordable
If you are a small business owner, it’s important to have insurance coverage. Insurance rates vary depending on the type of business and the location where it is located. For example, you can compare life insurance rates with various types of financial service providers. Common types of insurance for small businesses include the following.
- Property Damage
- Business Income Coverage
- General Liability (GL)
The average cost of these policies will vary from state-to-state and from city-to-city depending on the risk profile of your area. For example, if you own or operate in an area with a high crime rate, then crime insurance would be more expensive than if you operated in another part of town where there were no crimes at all. The best way to find out how much small business insurance costs is by getting quotes from multiple insurers before choosing one that fits your budget and needs best.
There’s a lot to cover when it comes to small business insurance. If this article has piqued your interest in learning more about the different types of coverage available for your business, we recommend checking out our other articles on the subject.