Small Business Brief

Business Advice

10 Types of Insurance Plans Your Small Business Needs

For small business, insurance is essential to protect your assets and your employees. Check out these 10 types of insurance plans every small business needs.

Would you like to protect your company against any potential loss or damages? Then you should consider the various types of insurance plans that are available.

Business insurance makes the economy work by assuming the risks of running a business. According to the Insurance Information Institute, business insurance protects the world’s economy from failure.

Do You Really Need Business Insurance?

Let’s put it this way, do you want to lose your company to a lawsuit?

Many business owners look at insurance as an added cost that’s like throwing money out the window. Insurance is just part of being in business. It protects you and your personal assets in the event of accidents, fires, and other unforeseen risks.

Businesses with employees must have worker’s compensation and disability insurance in most states. Even if you’re a solo-preneur, you should still have coverage for property and general liability.

Here are the types of insurance plans that will ensure you have adequate coverage for your business.

1. Professional Liability Insurance

This type of insurance is also called Errors & Omissions (E&O) insurance. This covers service-providing businesses like consulting and medical practices in the event of a lawsuit.

Such suits are typically for failure to perform professionally or when you make mistakes that cause harm to the client.

With professional liability insurance, there isn’t a standard policy that covers all businesses. The coverage needs vary by industry.

2. Business Owner’s Policy

This is a great plan for all business owners, whether you’re a solopreneur or have employees. A BOP is a bundled policy that covers general liability, vehicle, property coverage, crime insurance, and business interruption insurance.

BOPs can be tailored to fit your individual needs. For example, if you don’t own a vehicle, then you can alter the policy to exclude vehicle coverage.

3. Business Auto Insurance

Your employees may use their own cars for errands. Their own insurance should cover them in the event of an accident. The only exception is if the employee is for deliveries where the employee receives a fee.

Otherwise, if you’re using company cars make sure they have complete coverage.

Your insurance needs may vary depending on your situation and location. It’s a good idea to check with a local insurance company that understands the requirements in your state. In North Carolina, for instance, you can check out Amistad Insurance Services.

4. Property Insurance

This insurance is a must if you own or lease a space. You’ll need to have insurance to cover inventory, equipment, signs, and furniture. Property insurance can cover these in case of fire, theft, or storms.

The one caveat is that this insurance doesn’t cover “Acts of God” such as natural disasters. If your location is prone to flooding or earthquakes, you’ll need to get additional insurance to cover these events.

5. Worker’s Compensation

As soon as your first employee is hired, you’ll need to add worker’s comp to your insurance.

Even if your employee sits behind a desk all day, there could be claims from overuse injuries such as carpal tunnel, or slip and fall injuries.

Worker’s compensation insurance covers medical, disability and death benefits if an employee is hurt or dies on the job.

6. Product Liability Insurance

Does your business manufacture products for sale? If so, you need to have product liability insurance.

It doesn’t matter how strict your quality control procedures are. This type of insurance will cover your business if someone claims your product was defective and caused damages.

7. Insurance for Directors and Officers

Your directors and officers may be accused of taking actions that resulted in a loss of profit for your company. This insurance will protect your business and cover the costs if a lawsuit were to occur.

8. Data Breach Insurance

This is also called Cyber Liability Insurance. If your company handles sensitive customer data, you want to be covered in case of an attack. Data breach insurance will cover ID protection, legal and public relations costs, and liability.

9. Business Interruption Insurance

Business interruption insurance is set up so your company will be able to recover lost income due to a disaster. You must read the fine print on your policies to understand how your business will be covered.

When Hurricane Sandy struck the New York and New Jersey areas, many businesses were left devastated.

Businesses couldn’t operate because of evacuations and power outages that lasted weeks in some areas.

Despite that, some businesses didn’t get their claims paid by the insurance companies.

There are different types of insurance plans that cover business interruptions. Some policies have terms that explicitly say the businesses are covered during evacuations. Others don’t.

Also, some policies state that there must be physical damage for a claim to be paid.

10. Home Based Business Insurance

If you’re starting your business working from home, your homeowner’s policy won’t cover your business. Talk to your insurance company for options that will cover your business. You’ll need to make sure your business equipment and inventory are covered in case there’s an issue at home.

Finding the Right Types of Insurance Plans

With so many types of insurance plans available, how can you know which plans are right for your business? It doesn’t have to be as challenging as finding an affordable attorney.

Look at your entire business. Make a list of your business property, assets, and inventory. That will give you an idea what your risk is.

Talk to several insurance companies to work within your industry. Gather and compare quotes, taking into account the premium and coverage.

When you choose a company, make sure they are licensed and are in an excellent financial position to cover any claims.

Insurance Is Part of Doing Business

Running a business means that you have a responsibility to protect it for the sake of your family, your employees, and your customers.

Don’t leave your business to chance. Make sure you’re protected with the insurance coverage you need. If you have questions about insurance or running a business, ask on the Small Business Brief Forum