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Starting a business and being a small business owner is great. You get to channel your energy and passion into your craft and your customers. But on the flip side, you also have to spend time focusing on the nuts and bolts of your business. And one of those things is insurance.
Due to the surplus of business laws, business insurance can be confusing, and it’s also something you have to factor into your accounting as it lives on the books as an expense.
But if you own a small business, it’s pretty essential. Insurance can save your business from all sorts of unforeseen events like theft, natural disasters, lawsuits, and even employee screw-ups. Without it, you don’t have a parachute. With it, you can operate with the peace of mind that if any covered, unexpected losses come your way, you’re covered.
If you’re a new business owner, it’s helpful to understand the pieces of business insurance. There are four basic building blocks (and a bunch of smaller ones) for small business insurance coverage: property, liability, workers’ compensation, and auto insurance (if you have vehicles). Any way you slice it, you are going to want some combination of these to protect your business against the unknown.
What kind of business insurance do you need?
Property coverage. Whether you own or lease the physical things you use to run your business, you need property coverage to protect stuff like tools and equipment, computers, printers, laptops, furniture, office supplies, and more.
Liability insurance. You need liability insurance to protect you from lawsuits alleging injuries or property damage (either at your place of work or at your clients’). In many cases, contractors and other service providers are required to have general liability insurance before entering into a contract. Or you may just need it to sign a lease.
Workers compensation insurance. If you have employees, most states require you to have workers’ compensation insurance. It is designed to protect employers from the liabilities associated with employees who are injured on the job. It covers medical bills and, often times, lost wages and legal expenses associated with the specific case. It also protects you as the employer from being sued by employees who are injured on the job.
Commercial auto insurance. Lastly, if automobiles are part of your business, a commercial auto policy provides coverage for you, your employees, and the vehicles you own, lease, rent, or borrow. This coverage applies both on the road and off. Many states make this coverage a requirement. Even if it’s not mandatory, this kind of policy protects against liabilities that can arise from incidents involving these vehicles.
Property + liability = business owners policy
For many industries, insurance companies have simplified business insurance to offer what is called a “business owner’s policy,” or a BOP. This policy is a combination of property and liability coverage designed to make the coverage simpler to understand and more affordable to buy. A BOP is typically tailored to your industry to help you with specific scenarios associated with your type of business. For example, most BOP policies include “business interruption coverage.” This coverage helps cover the loss of income when you can’t run your technology business because of property damage, or when you can’t provide your service because your business was closed due to a fire. For most small businesses, a BOP is the best way to get the most coverage.
Putting it all together
To package the right coverage for your business, you need an adviser you can trust. An adviser can help you put together the protection you need without any unneeded coverage or expense. Ideally you can get this advice from an already trusted insurance company or broker that will make acquiring the right coverage easy and put your mind at rest. If you are concerned with cash flow needs, look into using a “pay as you go” provider to keep it affordable and aligned with your budget needs.
With the right business insurance coverage in place, you can focus on running and growing your business, not worrying about covered disaster scenarios.