Basics of Small Business Insurance

Something no business owner wants to think about, but something every business owner needs… Insurance.

Even the smallest, most basic business, needs insurance. Whether it’s protecting your employees against potential injuries, protecting your business against potential lawsuits, or protecting yourself from significant financial loss, insurance has a place in small business. However, it can quickly become overwhelming and expensive!

It’s important to understand what you need and why you need it. It’s also important to weigh the cost with the risk.

Required Coverage

Just like you’re required to have a minimum level of insurance on your car, your business is also required to have certain insurance coverage.

• If you have employees, you are required to have worker’s compensation insurance to protect them against potential workplace injuries (states have different requirements as to when you must get coverage).
• If you rent space from a building owner or you finance a building purchase yourself, you will likely be required by your landlord or banker to have coverage on the property.
• Similarly, if you’re leasing a piece of equipment or you’ve financed a large purchase, the lessor or lender will require you have coverage against loss.
• If you’re doing business with the government or you sign a contract with a large customer, it is likely that you’ll be required to have a minimum level of liability coverage.
• General Liability insurance is your most basic coverage in small business and covers everyday risks – bodily injury, property damage, personal & advertising injury, and legal defense costs.

Loss of Business Coverage

One area of coverage that many business owners overlook is insurance that protects you against loss of income. Business continuation insurance is one such form of insurance. For example, if you own a retail store and you have a fire, your property coverage will cover the damage to the store, but what about the revenue you’ll lose while you have to be closed up for repairs? That is not covered under your typical property coverage, but it would be covered under a business continuation policy. This type of policy helps you to continue to pay your staff, keep your lights on, and maintain your expenses during periods where your business can’t operate due to damage, injury, or other disruption.

Disability insurance can also help you if you are in a business that relies on you, specifically, or your physical ability. If you are a chiropractor and you break your hand, you will be out of work for a period of time while you heal. You cannot perform the duties required of your work. Disability can help cover you in that situation.

As a small business owner, especially when you’re small enough that a majority of your income relies on your personal ability to generate income, it’s important to consider coverage that will assist in the event you lose your ability to generate income.

I recently had a family member have a massive heart attack. He is healing and doing well, but as a chiropractor, who is the sole doctor in his practice, his practice is all but shut down while he heals. Having disability insurance and business continuation insurance in a situation like this can help for you to continue to provide for yourself and your family, while also keeping your staff employed during your absence.

Cyber Insurance

Twenty years ago, almost no one had cyber insurance. Today, you almost can’t get by without having it. Nearly every business has some sort of Cyber exposure. Whether you keep customer data electronically, you accept customer payments online or using technology, or you just communicate through email, Cyber insurance protects in you in the event of a cyber attack – phishing scam, data breach, system downtime – work with your insurance agent to make sure you get the right cyber coverage for your business.

Professional Liability

If you’re in a professional services business, you’re in the business of giving advice, or you’re providing services that could negatively impact your customer due to lack of quality or missed deadlines, you need professional liability insurance. Professional liability (often called Errors & Omissions Coverage) will cover financial harm caused by your work or the work of your team.  

And Many More

There are a million other policies (ok, maybe not a million, but sometimes it feels that way) that you can be offered in your small business. Talk with your broker, understand the coverage, review the cost, weigh the risks. There is such a thing as being over-insured. If you’re a small business generating $100,000 in annual revenue and it’s costing you $25,000 per year in insurance premiums, something is wrong.