Is Your Business Properly Insured?

Insurance is probably the biggest cost that a small business incurs.  The cost of insuring a small company does not differ radically from the cost of covering a multinational corporation.  Very little discounts apply.  Because of the expense, many small businesses go without insurance and run the risk of not being covered in times of catastrophic events.  Get an agency to advise you on the exact types of insurance you should consider purchasing.  Here are the key ones that are listed on the Small Business Administration’s website –

  • General Liability Insurance – Covers legal hassles due to accident, injuries and claims of negligence.  These policies protect against payments as the result of bodily injury, property damage, medical expenses, libel, slander, the cost of defending lawsuits, and settlement bonds or judgments required during an appeal procedure.
  • Product Liability Insurance – Companies that manufacture, wholesale, distribute, and retail a product may be liable for its safety.  Product liability insurance protects against financial loss as a result of a defect product that causes injury or bodily harm.  The amount of insurance you should purchase depends on the products you sell or manufacture.  A clothing store would have far less risk than a small appliance store, for example.
  • Professional Liability Insurance – Business owners providing services should consider having professional liability insurance (also known as errors and omissions insurance).  This type of liability coverage protects your business against malpractice, errors, and negligence in provision of services to your customers. Depending on your profession, you may be required by your state government to carry such a policy.  For example, physicians are required to purchase malpractice insurance as a condition of practicing in certain states.
  • Commercial Property Insurance – Property insurance covers everything related to the loss and damage of company property due to a wide-variety of events such as fire, smoke, wind and hail storms, civil disobedience and vandalism.  The definition of “property” is broad, and includes lost income, business interruption, buildings, computers, company papers and money.
  • Property insurance – Policies come in two basic forms: (1) all-risk policies covering a wide-range of incidents and perils except those noted in the policy; (2) peril-specific policies that cover losses from only those perils listed in the policy.  Examples of peril-specific policies include fire, flood, crime and business interruption insurance.  All-risk policies generally cover risks faced by the average small business, while peril-specific policies are usually purchased when there is high risk of peril in a certain area.  Consult your insurance agent or broker about the type of business property insurance best suited for your small business.
  • Home-Based Business Insurance – Contrary to popular belief, homeowners’ insurance policies do not generally cover home-based business losses.  Depending on risks to your business, you may add riders to your homeowners’ policy to cover normal business risks such as property damage.  However, homeowners’ policies only go so far in covering home-based businesses and you may need to purchase additional policies to cover other risks, such as general and professional liability.
  • Cyber-insurance – Cyber-Insurance is an insurance product used to protect businesses and individual users from Internet-based risks, and more generally from risks relating to information technology infrastructure and activities.

Put your insurance out to bid before it’s up for renewal.  Check out the rating of the insurance company that your agency has selected.  Ensure it is a reputable company that has been around for some time; otherwise, you might find when you need the insurance, the company is not there for you!