Investment in small businesses like any venture is risky, but nobody is in it for the risk. Everyone is in it for the profit.
A Harvard Business School study by Professor Shikhar Ghosh reveals that over 35 percent of all U.S. companies fail after five years and over 70 percent fail after 10 years. Small businesses fail due to various factors, including shortage of capital, natural disasters, theft, and legal challenges. While it is impossible to eliminate the risks associated with running a business, it can be mitigated with small business insurance. This article will explain the important things every business owner needs to know about this insurance and the dangers of not having one.
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What is small business insurance?
Small business insurance, also known as commercial insurance, is a collection of policies designed to protect a business’s assets, property, and income against risks and losses. It is like a safety net, providing financial assistance when unfortunate events you never see coming happen. It can determine if you will be celebrating a profit by the end of the year or closing down. The type of insurance you need for your business insurance is influenced by your profession, industry, location, and company size.
Types
Commercial insurance is designed for different business insurance risks, hence the best for any business is dependent on several factors like industry, size, and unique risks. Some types of commercial insurance you may consider for your business include:
General liability insurance
General liability insurance, also known as commercial general liability (CGL) insurance, protects against claims of bodily injury, personal injury due to libel or slander, property damage, copyright injury, and advertising injury to third parties. This type of insurance will cover legal fees, court costs, or medical expenses needed to take care of any claims filed by a third party other than your employee if you are found liable.
Business property insurance
Business property insurance, also known as hazard insurance or commercial property insurance, covers the physical assets of your business, such as buildings, equipment, raw materials, office furnishings, and inventory, against loss or damage. The insurance compensates your business if the property covered is lost or damaged as a result of common perils like fire or theft.
Professional or Business liability insurance or Errors & Omissions
A professional liability insurance (PLI), also known as errors and omissions (E&O) insurance, is designed to protect professionals like consultants, lawyers, and accountants from errors or omissions in their services. This coverage can protect you if you or your employee make any mistakes in your professional service.
Business interruption insurance
Business interruption insurance, also known as business income insurance, provides financial support to cover ongoing expenses and lost income if a covered event temporarily shuts down your business. The insurance can help you pay rent, payroll, and taxes during such events.
Workers’ compensation insurance
The federal government requires every business including private organizations with employees to have workers’ compensation insurance. Workers’ compensation insurance provides medical benefits and wage replacement for employees injured on the job, regardless of who was at fault for the injury.
Commercial auto insurance
Commercial auto insurance covers financial losses incurred when a company vehicle is involved in an accident and causes injury or damage. It covers a variety of vehicles, including cars, trucks, vans, and trailers.
How to choose the perfect insurance for your business
To choose the right insurance for your business:
Assess your risks
Insurance typically covers losses that a business cannot pay out of pocket. There are different risks associated with various industries’ operations. To efficiently assess your risk, consider the size of your business, the type of service you offer, your location, and potential lawsuits. The assessment will help you decide on the type of best fit for your small business insurance . Professional liability insurance for instance is perfect for experts that provide services like accounting and consulting.
Identify essential coverage for your business insurance
Not all insurance coverage is good for your business. While some states mandate certain insurance, getting additional coverage can help further insulate your brand from financial losses. Assess your business operation to identify the assets and properties you will need to insure. General liability for instance protects against third-party bodily injury and property damage. Similarly, product liability protects against claims related to injuries or damages caused by your products.
Consider your budget and compare business insurance quotes
Insurance usually has a deductible you must pay before the insurance company begins to cover your bills. Plans with high deductibles are typically cheaper than others with low deductibles. Consider your budgets to decide on a suitable plan for your business. Also, obtain quotes from multiple insurance providers to compare prices and coverage options.