Small Business Insurance Needs

A small business is a privately owned and operated company with limited size and revenue earnings depending on the type of industry it caters to. The Small Business Administration (SBA) of USA categorizes a business as ‘small’ if the average annual revenue earnings or total number of employees fall within a certain range based on the industry description for the business. However, irrespective of the industry or the business structure (Sole Proprietorship, LLC, Cooperative, Partnership etc.), the Small Businesses face a lot of risk factors in different facets of operation and maintenance. There comes the scope of Insurance.

Depending upon the type of business structure, risk tolerance capacity and asset pool a business may face some unique risks and hence may need to choose specific types of insurance coverages. But, there are a few common types of insurance coverages that one should consider for any generic small business. There options are described as below: 

General Liability Insurance

This is a basic insurance that broadly covers a business against accidents, injuries, and negligence claims. This insurance is used for protecting the owner, the business and its employees from damages incurred from physical injury, property damage, expenses for medical treatments, libel, slander etc. Also, it may cover the cost of defending lawsuits, settlement bonds or procuring judgments for an appeal procedure. 

Depending upon the type of business and industry, this generic insurance can be customized with multiple add-on features to cover more specific risks relevant to the business.

Property Insurance

If the business is operated from a privately owned or leased building or needs business personal properties such as – office equipment, computers, inventory or machines and tools to function, then it’s necessary to purchase a policy to protect it from hazards like a fire, theft, vandalism, smoke damage etc.  This insurance may also be tailored to provide coverage for business interruption or loss of earning when there’s a risk of losing revenue due to extended period of being unable to operate using the said properties.

Professional Liability Insurance

This insurance covers the risk of defense and damages from failing to or improperly rendering any professional services by the business. Typically this policy would provide protection against risks of malpractice, errors and negligence in providing services to the customers and is not covered by a general liability policy. This insurance is applicable to any professional firm such as the lawyers, accountants, technology consultants, agents for real estate business, insurance agents, doctors etc. and has to be customized to suit the requirements of the specific professional service. 

Product Liability Insurance

For a business that manufactures, distributes and/or retails a product, purchasing this insurance is highly recommended. This policy protects against financial loss incurring from a defective product that may cause the users injury or bodily harm. The risk varies depending upon the products that the business sells or manufactures and the insurance coverage can be customized to meet the specific needs for the products.

Worker’s Compensation Insurance

This insurance is a must have for any business hiring even a single employee as this covers medical treatment expenses, provides disability and death benefits to the employee in case of on the job physical injury or death. This policy assures that in exchange of receiving these benefits, an employee would not be suing his employer in lieu of the incident and hence save the business from bearing cost of legal actions. Almost all state laws require in a various degree that the businesses must have this insurance in place, if they have W2 employees. The penalties for non-compliance are quite high.

Commercial Auto Insurance

This protects a company’s vehicles that are used to transport employees, products or the equipment from damage and collisions. If the business owner uses his personal vehicle to serve the business, then it needs to be specifically discussed with the insurer to ensure adequate coverage from the business perspective as well as for personal usage. Depending on the negotiated coverage, the policy may pay to repair or replace the business vehicle because of damage due to accidents, theft, floods and other incidents.

Home-based Business Insurance

If the owner chooses to operate the business solely from his residence, then the business needs to be specifically covered by this insurance, as the Commercial Property Insurance would not be applicable there. Point to note is that the generic Homeowner’s Insurance typically does not cover the risks applicable to a business running from the same home. So, in order to protect the business properties such as supplies, equipment etc. from unfortunate events like theft, floods etc., it is required to purchase additional coverages specifically for the business itself. 

Cyber Threat – Data Breach Insurance

In today’s tech-savvy world, almost every business needs some or other kind of support from a software and/or internet. Along with the multitude of benefits of IT, there comes the treat of cyber security breach such as electronic or physical hacking, potential data loss etc. and it can have a huge impact on the business in terms of finance, legal compliance and market reputation. Data breach insurance helps to protect from any associated legal and/or other costs if the non-public information of employees or customers or other financial data such as the business’s bank account are stolen or inadvertently released by the company.

Apart from the above, there can be risks more specific to certain businesses. Below is a list a few insurance policies, you need to be aware of:

• Directors and Officers Insurance: To save the business from the costs and legal implications of the actions of its Directors and Officers.
• Business Crime Insurance: To protect the business against fraud, forgery or robbery.
• Renter’s Insurance:  A sub-set of Home-based Business Insurance which applies only to those owners who rent their home.
• Umbrella Insurance: To provide coverage over and above other liability coverages and is designed to handle unusually high losses.