Insuring Your Small Business: 5 Facts to Keep in Mind
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Taking risks likely goes hand in hand with running a business. However, you may be able to mitigate some of those risks with the right types of insurance.
Do you know if you're covered if your sign falls on a customer's car? Or if a patron hurts her back while carrying a purchase? We take a look at some of the facts to consider when considering small business insurance.
Fact 1: There is no one size fits all small business insurance
Every business encounters different risk scenarios. A tech startup faces vastly different threats to its livelihood than a food truck operator. Moreover, insurance laws and regulations can vary widely by state.
So, the notion that one policy covers everything is wishful thinking. According to thehartford.com, it pays to think in terms of building blocks.
While all small businesses typically need protection from risks, you can mitigate most of these threats by combining general liability, professional liability and workers' compensation into a comprehensive Business Owner's Policy (BOP) that's popular among many small business owners. These risks include:
• bodily injury caused by the business or its products and services,
• property damage due to factors like accidents or mishaps,
• lawsuits filed by customers or other stakeholders.
In addition, you might consider several different coverages depending on the nature of your business and where you operate. We take a further look here.
Fact 2: If there's a risk, chances are there's a coverage you can buy to mitigate it
Once you get beyond the basic coverages, there is no shortage of options you might consider. Here's a rundown of what thehartford.com and other providers consider typical:
Business Income Insurance
Provides a steady source of income if your business cannot operate due to factors such as fires, natural disasters, or theft. This coverage is also referred to as business interruption insurance.
Commercial Property Insurance
Covering equipment and materials lost due to theft or damage, this type of policy can help your business continue operations by replacing items needed to keep running. This coverage may also be referred to as small business hazard insurance.
Commercial Auto Insurance
Similar to personal auto insurance, this coverage pays for damages incurred while operating company vehicles.
Cyber Liabilities Insurance
A relative newcomer in the digital age, this coverage that's also referred to as data breach coverage protects your business from the efforts of hackers who steal and use personally identifiable information to commit fraud like identity theft.
As reputation management after a breach can prove costly, coverage can help defray the expense of notifying those impacted, offering credit monitoring services, and restoring the business image through public relations efforts.
Employers' Liability Insurance
Also known as employment practices liability insurance, this coverage protects the business from employment-related claims. These can include wrongful termination, sexual harassment and age, race, orientation, or other types of discrimination.
Fact 3: You can get coverage for your coverages
While the expression 'you can outrun your coverage' holds true in sports like football, it doesn't necessarily apply to the small business insurance landscape.
Commercial umbrella insurance is a coverage business owners can purchase that extends the limits on certain insurable liabilities. This way, if a claim goes beyond what's covered, the umbrella policy kicks in and covers what's left up to the policy's limits.
The more you pay, the more coverage you get, so you play a role in setting the parameters.
Fact 4: Your home-based business needs coverages, too
If you run a small business out of your home, you may want to consider a home-based business insurance policy.
This option typically attaches to the homeowner's insurance policy as a rider and covers business equipment. It may also extend coverage for injuries resulting in third-party claims.
Fact 5: It pays to shop around ... and around
Insurance costs can vary significantly from provider to provider, which is why the SBA recommends getting several quotes before choosing one and comparing rates, terms, and other conditions.
To help in this process, the SBA recommends choosing a reputable licensed business insurance agent. "Keep in mind that agents 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 or her own."
Final Fun Fact: Being covered is more fun than being held liable
A significant claim against your business can mean the end of your business if you don't have the right types and amounts of coverage. Unless you have unlimited deep pockets—and what small business does—it pays to have insurance.