Sadly, despite their importance to the economy,90% of all small business startups fail. Risk – from hiring employees, using office space, having vehicles, and more – makes this potential failure all the more frightening. One disaster or lawsuit can bring down all the hard work a business leader has put into a company.
Luckily, there is a wide range of insurance types that businesses can take advantage of to protect themselves against catastrophe. Here are some types of insurance you should consider for your business. With major business business and personal events like acquisitions, hires, weddings, and office rental, you need to prepare yourself for the best and worst scenarios so you have reserve funds for capital intensive opportunities.
There are three types of liability insurance applicable here: general, professional, and product. Although not all businesses need all three, they all deserve serious consideration to have full protection.
General liability insurance covers almost everything that can happen to a business or person, including medical expenses, defending lawsuits, and slander. It’s argued that every business needs it (in certain states, it’s required), as general liability policies will protect you and provide damages if your products, services, or workers cause any kind of harm to anything or anyone.
Professional liability insurance, on the other hand, covers losses caused by the performance or non-performance of services. Also called errors and omissions insurance, it protects you and your company against claims of negligence, malpractice, and failure to perform services. It’s important to remember that general liability insurance doesn’t provide this more specific protection, as well as that different industries may require different types of liability insurance. Legal offices will need different insurance than shipping providers, and accountants will need different insurance than real estate agents.
Finally, product liability insurance covers damages resulting from the use of your products. Although you might take every possible precaution to ensure your products are safe, accidents happen; it’s important to make sure that you and your business are covered in case something goes wrong.
Property insurance is one of the fundamentals of any solid insurance package. This covers the loss and damage to company property resulting from events like natural disasters, break-ins, and vandalism. If you incur damages, your policy can cover things like inventory, equipment, and business records. Keep in mind, though, that all property insurance policies can be different. Pay attention to what your specific business needs when making a choice.
Business Interruption Insurance
Business interruption insurance protects your company in case a natural disaster or other “act of God” occurs and interrupts business operations. For instance, if a hurricane destroys your manufacturing location, business interruption insurance will cover any losses you incur due to that hurricane. This insurance will also cover lost income and relocation fees due to an inability to work in the office, making this especially applicable to brick and mortar companies. If you’re in a location where natural disasters can strike, it’s worth looking into this type of coverage.
If you have company vehicles, commercial auto insurance will protect automobiles that carry employees, equipment, and products against collisions and other damage. Even better, having non-owned auto liability will protect your company in case an employee in his or her own car has an accident while doing company business.
As with liability insurance, it’s important to pay attention to the vehicle insurance regulations for each state or territory. Make sure you’re adhering to state rules to avoid steep penalties.
Worker’s Compensation Insurance
You should purchase worker's compensation insurance as soon as you hire your first employee. This policy type covers medical fees, wage replacement, disability, and death benefits if an employee is injured or dies as a result of working at your company. Even if your employees are just office workers, you never know when conditions like carpal tunnel syndrome can occur – and you may be held liable.
Although it’s a little morbid to think about, worker’s compensation insurance will save you and your business in case disaster strikes.
Data Breach Insurance
The rise of technology in the 21st century has made data breach insurance a necessity for any company keeping online records. Since businesses are responsible for protecting employee and client information, they are liable if a breach occurs. The average total cost of a data breach is $3.8 million, meaning covering yourself in the age of hackers is a must.
Although it’s important to remain optimistic, you should also be practical when considering risks to yourself and your business. By covering your bases through purchasing different insurance policies, you can give yourself some peace of mind and focus on what’s important: growing your company.