What You Risk Without Small Business Insurance
For those small business owners out there wondering what exactly they are risking without obtaining small business insurance, the answer is simple. Everything! As one of the most important aspects of protecting the security of your small business, insurance also seems to be the most overlooked. Hard work and creativity are the cornerstones of a successful company; however, a simple lawsuit or theft could damage the integrity of your business and attack your personal assets as well, leaving you in the gutter. Thus, obtaining the right small business insurance is of utmost importance to the livelihood of your company, and the livelihood of you as well.
The Basics on Small Business Insurance
Getting a grasp on what small business insurance is and does can be difficult. Simply having any type of insurance is not enough these days, as various types of insurance are put into play in different situations. Most insurance companies offer certain packages that merge protection from chief liability hazards and property risks. Theses packages are known as a BOP or a Business Owners Policy. As a small business owner you would purchase a BOP that was made for small companies with similar risks. Then certain separately sold coverage's would be added on to that. Business owners policy's usually include:
- Liability - This takes care of any legal responsibilities related to injuries to customers at our office, or any property damage that may occur at your client's location.
- Property - This insures the work place and any assets that the company owns.
- Business Interruption - This takes care of anything that might disturb function of a business such as fire, or unpredictable events of that nature.
Separate coverage's will more than likely needed to be added on to your BOP. Essential insurance such as auto, disability, workers comp, and professional liability insurance are not included in the business owner's policy, and can be a legal requirement for your business.
Legal Requirements of Owning Small Business Insurance
Not only should you consider small business insurance as a general requirement, but some types of insurance can be a legal requirement for you company depending on the state in which your business is located. Certain states require workers compensation insurance if you hire employees, or have set insurances that must be purchased in order to obtain a business license in that particular state. It's suggested that you look into your specific states legal requirements to make sure that you're not at legal risk.
Evaluate Your Risks
Possibly one of the most important steps in obtaining insurance is to first evaluate your risks. As unpredictable situations occur on a daily basis, it is nearly impossible to predict the types of insurance you might need. The insurance agency you choose will help evaluate your risks according to the type of business you are in, and provide you with a general idea of what insurance you should purchase to minimize or eliminate risks you might be taking. Experienced agents will use some sort of survey to analyze your risks along with their extensive experience to make sure you are getting what you need.
Some Types of Insurance and Risks They Minimize or Eliminate
As explained earlier, there are three basic types of insurance that will come with a BOP. Again, these usually include liability, property, and business interruption insurance. You'll find those three along with other small business insurance to consider in further detail below:
- General Liability - Also known as casualty insurance, this gives protection from any harm that may come to another person or their property that you are responsible for. Thus, if someone is harmed on your property due to equipment or anything of the like, then you are covered.
- Business Interruption - As one of the most important types of insurance it is still often overlooked. Business interruption insurance provides coverage against major disasters, such as fires, that render your business non-operational for any amount of time. Therefore, it covers profits you would have received while the business could not operate, as well as utilities such as gas, water, and electric. Insurance agents will guide you on the policy limits for your particular situation.
- Property - Typically property insurance covers loss or damage to your property and assets contained on the property. Generally it is divided into two different groups as "building" and "personal property". Building property insurance, as it suggests, provides protection against anything that might happen in the work place. This means such disasters as wind, vandalism, or fire are covered, but not general wear of the building, or earthquakes, hurricanes, etc. Personal property insurance is coverage for assets inside the building. Agents will guide you through the exact assets this covers.
- Professional Liability Insurance - Purchased as a separate coverage, professional liability insurance also happens to be one of the most important for a small business. Also known as E & O or errors and omissions coverage, it is purchased to cover against any expensive litigation that might happen from negligence or inadequacy claims from services provided to clients. Lawsuits as such occur when you the professional do not perform the services agreed upon, or do not live up to expectations. Professional liability coverage is required by some states and professions. Either way, it is a good idea to carry it if it's possible that the service your business provides could cause any sort of damage.
- Workers Compensation Insurance - Purchased as a separate coverage, workers compensation insurance is just as important as professional liability, property, and business interruption insurance. Even if you've made your business as safe as possible, accidents and harm to employees could still occur in the place of business. This is when workers compensation comes in handy. Not only does it guard employers from lawsuits occurring from accidents in the workplace, it also covers workers who have been injured on the job, or any work related impairment or illness. Payments are made to the worker or workers injured without the need to establish fault. Most of the time workers compensation is a legal requirement by the state, and each state establishes its own rules as to limits on compensation and things of the like.
- Product Liability Insurance - If your company produces toys, clothing, food, or any other type of product that could potentially cause harm to a customer, then you should consider product liability insurance. In reality though, any business that offers a product should look at getting product liability. This coverage protects from any harm caused to a customer by your product. Many times this is included in the BOP, if not it can put your business at high risk.
- Commercial Automobile Insurance - When using any sort of vehicle for sole business purposes it is important to have some sort of commercial auto insurance. Thus, those driving the business vehicles as well as the vehicle itself will be protected against accidents that could occur. Using a personal vehicle for business purposes is also a viable option sometimes for a simple extra fee. Good agents will evaluate your situation and give you a quote on commercial use of any given vehicle.
- Employment Practices Liability Insurance - This type of insurance will cover you against any claims any employee might make about their legal rights being violated. As these types of claims have been steadily rising lately, it has become an important type of insurance to consider. Such lawsuits could include discrimination, unjust termination, sexual harassment, unjust authority, emotional distress, as well as a plethora of other claims.
- Umbrella Insurance - Umbrella insurance is a particular small business insurance or auto insurance that covers you when limits on your other liability policy have been past. This simply minimizes your liability risk even more.
The types of small business insurance are numerous and complicated. Once again, it is suggested that you consult an agent on the risks that your particular business could have, and allow them to advise you on what is necessary for your small business insurance.
Other Things You Can Do to Minimize Disaster
A successful company will not only purchase the right type of small business insurance, but will plan ahead to bounce back after certain types of disaster. General risk management advice would state that training your employees for any kind of disaster is of utmost importance since they are the ones who will be there when it occurs. Teach all employees about fire safety. Especially staff that are around flammable materials or anything of the like. Keep your electrical system up to date, and make sure that your company is located in a building that is fire-resistant, and that the construction of the building matches with damage-resistant codes for buildings. Put together a plan for post disaster that you and all of your employees know about. This plan could include simple ideas such as keeping multiple copies of records that you could be legally liable for, or prepping for use of an alternate workplace. Have a list of important contacts such as customers, contractors, small business insurance agents, and any other people you might need to contact on a daily basis. Keeping such a list will give you the means to get in touch with those important contacts after a disaster, and help maintain relationships while your business is in transition.
You'll have all the protection you need between smart disaster planning and a BOP with additional separate plans such as professional liability as well as workers compensation. Building an insurance and disaster strategy will not only cover you from losses, but will ultimately boost your company into success.
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