Small Business Basics: Insurance
Updated: Jan 16
I counsel my clients that insurance is the first thing to do when starting a new business. Insurance is there for when you’ve done your best, but things go wrong. Ask yourself, what will you do if a client gets injured and blames you? What if you yourself get injured? What if someone who works for you is injured? Or if property is damaged? Or you are unable to operate your business for some other reason? Each of these events could cost you a lot of money.
Speak to insurance agents to find out what kinds of coverage makes sense for your business, and compare terms and prices to find the best deal for you. Some types of insurance to consider for your business that could help in these situations are: general liability, professional liability, business interruption, umbrella insurance, short-term and long-term disability, and worker’s compensation insurance.
General Liability insurance helps cover the costs of claims made against your business for bodily injury or property damage. For example, a customer slips and falls in your store and makes a claim against your business for the costs of their medical treatment. General Liability Insurance can help cover the costs of this claim.
Professional liability insurance helps cover the costs of claims that your business committed errors or omissions in the products or services you provided. For example, a client makes a claim against their hair stylist because, due to an error in processing her color treatment, her hair turned bright orange instead of the chestnut color she requested. The hair stylist’s Professional Liability Insurance can help cover the costs to settle this claim.
Business Insurance helps replace lost income if you must temporarily shut down your business because of a covered incident. For example, you lease a space; the space next door has a fire, and smoke damage prevents you from holding classes for several weeks.
Umbrella policy extends the limits of your liability insurance policies. If a liability claim made against your business exceeds the limits of your primary liability coverage, Commercial Umbrella Insurance can help cover the excess liability costs. This acts as a financial safety net for costly liability claims made against your business.
Other: property insurance insures against the risk that your property is damaged, for example flood insurance. Workers comp. helps provide benefits to employees who become injured or ill on the job. In the unfortunate event that an employee dies due to a work-related injury or illness, benefits can be paid to his or her family. You might look into short term or long term disability to cover yourself in case you are injured or get sick.
To decide what insurance to buy, you need to assess your risks. Think about what kind of accidents, natural disasters, or lawsuits could damage your business. Commercial insurance agents can help you find policies that match your business needs. They receive commissions from insurance companies when they sell policies, so it's important to find a licensed agent that’s interested in your needs as much as his/her own.
Shop around, because prices and benefits can vary significantly. You should compare rates, terms, and benefits for insurance offers from several different agents.
Remember to re-assess every year. As your business grows, so do your liabilities. If you have hired employees or changed locations, you should contact your insurance agent to discuss changes in your business and how they affect your coverage.