Your company can’t afford to not have small business insurance. Why?
An insurance policy is a contract you sign into that indemnifies you for covered losses. It helps you manage cash flow uncertainty—in the event that an employee gets hurt, or out-of-pocket costs could be extreme. Often, it also helps you stay compliant with legal requirements.
At the end of the day, to operate efficiently, your business needs to invest in a variety of types of insurance. You never know what tomorrow could bring. That insurance coverage protects you, your employees, your investments and finances.
What kind of insurance your company needs depends on your business. But in general, there are a few kinds that truly come in handy in a time of need. Some of them are even required by law.
Let’s take a look at seven of the most common types you need today.
1. General Liability Insurance
This type of insurance is one that is required for almost every business. It protects your company in a ‘general’ way when things like injury or property damage happen.
If your company is legally responsible for something like this—whether you, your employees, your business in general—business liability insurance helps pay attorney fees, settlements, and the like.
What kind of claims can be filed under this umbrella? Any bodily injury or property damage that is a direct result of your products, services, or operations could be under fire. It’s also helpful in case damage occurs on your landlord’s property.
However, this insurance doesn’t cover things like employee injury, auto accidents, and the like. That’s why you need more than one kind of insurance—as outlined on this website. Which brings us to the next form of coverage.
2. Workers’ Compensation
This type of insurance is also usually state-mandated.
Workers’ compensation insurance provides benefits to any employee that suffers from a job-related injury or illness. It also protects you in that it assists you in paying legal or medical fees.
This insurance aids your employee regardless of who was at fault—whether that be you, another employee, a customer, a third party. If they suffer from an injury while on the job, it’s likely to be covered by this kind of insurance.
The only real exceptions would be if the illness or injury came from a self-inflicted injury or if the employee was not on the job. It also doesn’t apply if the employee wasn’t following proper company policy. This is why adequate training is also essential.
3. Unemployment Insurance
Unemployment insurance provides benefits to eligible workers who become unemployed due to no fault of their own. The reasons for eligibility are state-determined, such as getting laid off for economic reasons.
This doesn’t apply in the case that an employee got fired for misconduct, poor behavior, and the like. But it does help you cover eligible employees. You’ll likely need the financial aid too, especially in cases such as a recession.
4. Commercial Property Insurance
Your company, regardless of its location, needs commercial property insurance. This is true whether you own your building, are leasing it, or even if you work from home.
This insurance protects your building and its contents, as well as exterior items like signs or fences, in the event of the following:
- Fire or explosions
- Burst pipes
Major catastrophes like earthquakes or floods are typically not covered upfront unless they get added to the policy.
Since most of these events are unpredictable, it’s necessary to have this kind of small business insurance. It can protect anything inside your building, such as computers, furniture, equipment, and documents, as well as things outside of the property.
5. Disability Insurance
Disability insurance isn’t required but can be incredibly helpful in the event that an employee wants to file for disability while employed by you.
If an employee is unable to perform their duties and earn money, they may be eligible for a disability payment. What constitutes a disability, and whether an employee qualifies, gets determined by the policy you create with the insurance company.
Say a short-term disability means an employee can’t work for three to six months. This insurance covers a portion of their salary for that period. Long-term disability would cover a part of the salary for anything six months and longer.
To receive disability, the employee must have passed an ‘elimination period’ and still be disabled. If they are recovered by the end of this period, it’s likely they aren’t eligible. To receive payment and receive benefits, it must surpass this period.
6. Professional Liability Insurance
Everyone wants to believe they’re an expert in their field. And even if you are, that doesn’t mean that errors don’t happen. That’s where professional liability insurance comes in.
Also known as E&O insurance (for errors and omissions), this type of insurance covers your business if your professional services are found to be negligent. If you make a mistake which financially impacts a customer, you could get sued—and that’s where this coverage steps in.
Some clients even require a business to have this type of insurance before doing work with them. It makes sense, too, considering that certain financial mistakes can be large. If an accountant makes a clerical error, who’s going to pay those thousands of dollars?
You’ll need this coverage on your side in the event that any customer or client makes a claim against you.
7. Commercial Auto Insurance
If your business requires a fleet of drivers, you’ll need commercial auto insurance. This coverage protects your company in the event that physical damage comes from one of your drivers or vehicles.
Commercial vehicles assume a risk that’s greater than personal vehicles.
Small Business Insurance: Your Company Needs It
At the very least, small business insurance grants you peace of mind. In extreme cases, it can help your business from going under. You’ve likely worked very hard to get your product or service on the market—insurance can keep it there.
Check out the ‘Accounting’ section of our blog for tips on how to add insurance into your annual budget.