When you are in business, there is often a difference between what you need to insure, what you should insure, and what you can insure. How do you know the difference? Of course it is all a personal call, but it should help to know what sorts of policies are out there so that you can at least make an informed decision as you proceed.
Here are the vitals:
Health: Of course it is no secret that health insurance is a key factor in any small business for many reasons, but did you know that employees consistently rank health benefits among the most important “fringe” benefits of employment? The amount of insurance you can afford, with what deductibles and what kind of coverage, is not easy to understand. One site that can help a lot is E-HealthInsurance where you can compare policies and coverage.
Business Owner: Business owner insurance is also known as “catch-all” coverage. It is a basic policy that provides protection from fire, other mishaps, as well as some liability protection (see next).
Comprehensive General Liability (CGL or Liability insurance): If you have a business that serves the public, then you need liability insurance, for two reasons. First, it covers you if someone is injured because of the negligence of you or your employees. Second, if you are sued for damages relating to that accident, the policy will pay the cost of your attorney.
Property/Casualty: At home you would never think of not having property insurance, and your mortgage holder likely requires it, and for a good reason: If your property is damaged, the insurance covers the loss and replacement. But far too many small businesses fail to follow that logic with their own small businesses.
Property insurance protects your business against physical damage or loss of business from things like fire, theft, explosion, or vandalism. You can cover:
- Inventory and machinery, leased or owned
- Buildings and structures, leased or owned
- Cars, trucks, and vans, leased or owned
- Computers, printers, servers, and phone equipment
- Furniture and supplies
- Important papers, books, and documents
- Signs and fences
Worker’s Compensation: Worker’s comp insurance is required by law in every state except Texas, but that said, some employers are exempt from the requirement no matter the state. In some states, businesses with but a few employees (typically under five) are not required to carry worker’s comp insurance. Check with your state insurance commissioner’s office.
As with liability insurance, worker’s comp does two things. First, it covers medical bills and lost wages for injured employees. Second, if an employee is injured or killed, it protects the owner against claims by the injured employee’s family.
Errors and Omissions: E and O insurance is for service businesses, and offers protection if you neglect to do something that causes a client damage. For example, a lawyer’s legal malpractice insurance is a type of E and O coverage.
Business Interruption: Business interruption insurance is designed to cover the loss of income if normal business operations are disrupted by damage due to fire, flood, or other disaster.
Key Man: Think about it: What would happen to your business if a key employee died? For some small businesses, the company would die too. Like the name indicates, this sort of policy insures your business against the death of that vital employee.
Automobile: If your business makes deliveries, or if you provide employees with company cars, then auto insurance is a must.
Life: Why are you in business for yourself? One reason surely is that you want to create financial stability for your family. Well, what if something happens to you — what then? Without adequate life insurance, you blew it.