Do I Really Need Small Business Insurance?
If you’re looking to reduce expenses, can insurance be one of the items you cut? After all, you pay every month and never get any benefit from it. Before you act, ask yourself these questions: How much money do you have in savings to replace your inventory if it’s destroyed in a fire? What extra funds do you have to pay a court judgment if you’re sued? Chances are, your answers will prompt you to think again. Insurance protects you from the unexpected. Here’s an overview of various types of small business insurance and why you may need them.
Business Interruption Insurance
These plans cover the loss of income you might incur as the result of a disaster. It’s important if you operate your business out of a physical location, and pays if you are forced to close your business after a disaster or while you rebuild after one. It can cover items like loss of profit, overhead expense and the cost to move to a temporary location.
Business Liability Insurance
This coverage protects you, your business, and your employees from claims involving property damage or bodily injury, up to a certain amount. For example, a customer suffers an injury after falling on a wet floor in your business. There are specific types of liability insurance, including professional liability that covers you for claims of negligence from your actions (or inactions). Product liability insurance pays claims for damages caused by a product you sell.
Business Overhead Expense Disability Insurance
This coverage helps pay overhead expenses if you are disabled and are unable to work. That means it can help your business stay open while you recover. Covered overhead expenses can include rent, utilities, employee salaries and taxes, and maintenance items. Rates are based on three factors: the monthly benefit amount you select, your waiting period and the length of time that benefits will be paid.
Business Owner Policy
This is a bundled insurance plan that combines several different types into one package. It can include property, business continuation, and liability insurance. That can simplify the buying process and cost less. You will still need to purchase other coverages like worker’s compensation, health or disability insurance, or professional liability coverage separately.
Commercial Property Insurance
This insurance reimburses you for business property loss associated with theft or damage from a fire or storm. The reimbursement is often based on the cost to replace items like inventory or equipment. A deductible or other cost-sharing provision may apply before benefits are paid. Check with your insurance agent to determine what coverage is needed if you have a home-based business.
Key Person / Buy-Sell Insurance
This is a category of insurance that protects a business if the owner, business partner, or key employee dies unexpectedly. It’s also called business continuation insurance because it helps the business to continue without these individuals. It involves the purchase of life insurance, but the benefits are paid to the business. Life insurance can also provide the funds for co-owners to purchase the others’ share for a pre-determined amount. A legally binding agreement is used to structure these types of arrangements.
This coverage is required in most states. It provides medical, disability, and death benefits for employees if they are injured or die in the course of employment with your business. In exchange, employees give up their right to sue the business for negligence.
Small business insurance, no matter the type, is designed to protect you and your employees from the unexpected. With it, you share a financial risk that would otherwise devastate your business. Check with your insurance agent to review your current coverage. You can also learn more about buying business insurance by consulting the Small Business Administration’s Business Guide.