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An Overview of Insurance Options for Small Businesses
  • 18 December 2017
  • Daniel Vahab

An Overview of Insurance Options for Small Businesses

One of the many items a small business has to consider (and re-consider) is insurance. You want to make sure you’re protected against those what-if scenarios that could do serious harm to your business if you aren’t prepared. But you might find yourself asking a lot of questions out of the gate. What’s mandated? What’s best for my business? What are the different policies and what do they cover? How much does it all cost?

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While insurance can be expensive and complicated, it’s important to consider your options and look at the details of a plan before making a final decision. Investigate what each policy covers (and what it does not cover), as well as expiration dates and premiums.

To further your research, you can consult with fellow small business owners, look at reviews and ratings online, compare quotes from different brokers, and read published articles on the subject. Be sure to continually review your unique needs and wants as your business grows and as the options available to you change.

Many small businesses carry both liability and property insurance.

Liability insurance

If you own a small business, you should absolutely have liability insurance. The policy helps protect you when a third party claims that you, someone that works for you, or your products or services, have caused property damage or bodily injury.

According to the U.S. Small Business Administration (SBA), liability insurance protects a company's assets and helps to cover costs incurred if and when someone gets injured on your property, or if someone from your company is the cause of injury or property damage. This type of policy covers costs associated with your legal defense and any associated settlements. In addition, you may be covered for any damage caused to a property you rent if, for example, a fire occurs. Liability insurance can also protect against claims of "false or misleading advertising, including libel, slander, and copyright infringement."

Along these same lines is professional liability insurance, otherwise known as errors and omissions (E&O) insurance. This type of policy protects you against accusations of harm, but it is specific to professional services. It is commonly purchased by service providers such as real estate agents, consultants, lawyers, accountants, and insurance agents. If your business is considered a professional service, you should consider getting both types of liability insurance—general and professional—in order to be fully covered.

In today’s litigious society, even if you think your chances of being faced with a claim are slim, insurance for your small business is a wise investment. Depending on your type of business and what your needs are, it doesn’t have to cost a lot either – with many premiums ranging from $750 to $2,000 per year.

Property insurance

Property insurance is often combined with general liability insurance coverage. Businesses that own any sort of commercial property, whether real estate, company vehicles, computers, or furniture – should consider carrying property insurance. These policies offer security against the risk of fire, theft, vandalism, and more.

As Forbes suggests, you could also extend your coverage by adding protection for "business interruption/loss of earning." This type of coverage helps protect income coming in if your property gets damaged so badly that your business cannot function.

If you’re a home-based small business, know that your home insurance may not protect against business losses if something happens to your home. Property insurance can help supplement that potential risk.

Regardless of your industry, growth stage, or type of business, it’s critical to consider the available insurance options for small businesses. In the end, you want to make sure that you have the necessary protection if and when something unexpected happens. Before making a final decision, be sure to consider the pros and cons of each type of policy. Weigh the benefits of what is covered (and what is not), the associated costs like deductibles and premiums, and your particular needs to decide which insurance options are best for you.

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