Business insurance is all about weighing your potential risks and providing coverage in case of an event. But what happens if you have a business with minimal risk? Do you still need insurance? We know, so you don't have to.
The truth is that not every single business needs insurance, but it's rare for a business not to need any type of protection. That's why an independent insurance agent is a much-needed asset to have on your side. They're experts in business insurance and can help you prepare for risks long before they happen. So if you're here to find out whether your business needs insurance or not, keep reading.
My Small Business Isn’t Very Risky; Do I Need Business Insurance?
This is a bit of a loaded question because nearly anything can be considered a small business these days. But the long and short of it is that if you're providing a product or service to a third party, there's a chance that the third party will be unhappy with the results and therefore you're at risk.
Determining whether your business needs insurance coverage comes down to the type of business you run and what risks you face. For example, let's say you have a full-time job but you're a freelance writer on the side. There's a good chance that none of your freelance clients are going to sue you for the types of articles you're writing, so you probably don't need business insurance. However, let's say you run a freelance writing company that employs writers, editors, and works with a variety of clients. You'll want protection in case you have an incident with a client or a customer.
At the end of the day, as a business owner, everything you personally own and everything tied to your business is always at risk if someone decides to sue you. That's why most businesses, no matter the risk, have insurance. If you find yourself in an unexpected incident, you'd rather be protected than exposed.
What Does a Business Policy Cover?
A business policy can include a variety of insurance options that cover every aspect of your business. The standard basic insurance coverage is general liability coverage or CGL. This insurance protects your business if you get sued for any reason by someone who does not work for you. However, there are a variety of things that a CGL will not cover, such as property damage or a natural disaster, and that's where additional business insurance options come in. When working with your independent insurance agent, you can discuss the following business policy options and which ones are necessary for you.
- General liability insurance: This covers third-party liability claims for injuries to other people.
- Professional liability and malpractice insurance: This covers professionals against loss due to negligent professional duty, wrongful acts, and advice and services that lead to another person’s loss or injury.
- Product liability insurance: This covers against faulty products and damage, illness, injury, or death that may occur from using a faulty product.
- Property insurance: This covers loss and damage to your commercial business property due to fires, storms, and other causes.
- Commercial vehicle insurance: This covers commercial vehicles and drivers for collision, liability, property damage, personal injury, and comprehensive coverage (also known as "other than collision").
- Workers' compensation: This covers your employees if they get ill or are injured while working on the job.
- Loss of income: This covers your business expenses, such as rent and employee wages, if you can’t operate your business.
- Key person insurance: This covers loss of income that may result from the head of the business or other key personnel becoming incapacitated or passing away (also known as key man insurance).
- Cybercrime insurance: This provides protection for risks due to Internet use and online communications.
- Records retention policies: This covers loss of important data and financial records.
- Specialty coverage: Insurance that covers various specific business risks, such as those of landlords, farmers, and commercial operations that put on one-day events, such as seminars or concerts.
What Does Being Declared an LLC Do to Protect My Business?
There's a false belief that declaring your business as an LLC means that anyone who sues you cannot go after any of your personal assets. However, this is not always the case. Traditionally, an LLC does provide protection in the sense that you cannot be held personally accountable for any debts that result from a business you own or are involved in. This means, if you own a salon and someone slips and falls breaking their ankle, they cannot sue you personally for their medical bills. They can sue your salon, which is why you would want the proper liability coverage.
My Small Business Operates out of My Home, Do I Need Business Insurance?
Yes, operating out of your home doesn't eliminate all the risks associated with owning a business. Consider the following:
- Do you keep inventory in your home? What if your home were to catch on fire or be burglarized and all of your business inventory was lost?
- Do you complete work that could be completed erroneously or embarrass a client? If you're creating advertisements for clients out of your home and a competitor sues you for slander, you'll need errors and omissions insurance.
- Do you sell products that could make someone ill? What happens if you're selling homemade lotions, and a client has an allergic reaction resulting in hospitalization?
- Do you travel to other people's property to work? Your business might be based in your home, but if you travel to someone else's property to complete work and you inadvertently damage something on their property, you could be sued.
All of these scenarios can be covered with the proper home-based business insurance. The good news is that you'll have a few options for insurance, and your independent insurance agent can help you determine which one is best for you.
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I Only Have One Other Employee; Do I Need Workers’ Comp?
It depends on your state laws. Every state has a minimum amount of workers that require you as a business owner to have workers' compensation. Some states base their laws on the type of business you're running as well.
Whether you're required to have workers' comp or not, if your employee is at risk of getting injured or ill on the job, it's a good idea to have. It's also relatively inexpensive so it will be worth the investment.
What Does Workers' Compensation Cover?
A workers’ comp insurance policy will cover the majority of injuries that arise from work-related duties, ranging from simple slip-and-fall accidents to repetitive motion injuries and even an illness or disease contracted at work.
Employee coverage will usually include the following:
- Medical bills and rehabilitation costs
- Weekly payments in place of missed wages
- Compensation for past, present, and future economic loss due to disability
If an employee dies (knock on wood), their family will usually receive the following:
- Compensation for funeral costs
- Legal fees (if the family sues)
- Death benefits
Is Business Insurance Tax Deductible?
Yes, generally speaking, you can deduct the cost of your insurance as a business expense. According to the IRS, you can also deduct a variety of other business-related expenses from your taxes, including:
- Business use of your home
- Business use of your car
- Employees' pay
- Retirement plans
- Rent expense
What Other Business Coverages Should I Consider?
The beauty of business insurance is that you can build a policy that fits your needs, and there's coverage for nearly anything you can think of. When working with your independent insurance agent, consider the following additional policies in addition to what we've already talked about:
- Business owners policy: Also known as a BOP, this policy is designed for small businesses that allow you to combine the most common business insurance policies into one package. Most BOPs include liability insurance, property insurance, and business interruption insurance.
- Commercial auto insurance: If you have a vehicle that you'll be using for the business, you'll want to purchase specific auto insurance coverage for any incidents that take place while driving for work.
- Errors and omissions insurance: This covers a business for services rendered that did not have the expected or promised results, or that result in a loss or personal injury suffered by the person receiving those services. It also covers situations where the individual or company failed to render services at all.
- Flood and earthquake insurance: If your business is located somewhere prone to flooding or earthquakes, you'll want to purchase this insurance as it is not included in your general property insurance.
- Group insurance or employee benefits: This covers health, life, short-term, and long-term disability.
- Product liability insurance: This is coverage against product defects.
Here’s How an Independent Insurance Agent Would Help
As you can see there are a variety of options when it comes to business insurance, so having an expert in your corner can help make the process much easier. An independent insurance agent knows the ins and outs of business insurance. They search through multiple carriers to find providers who specialize in this type of insurance, deliver quotes from a number of different sources, and help you walk through them all to find the best blend of coverage and cost.
TrustedChoice.com Article | Reviewed by Paul Martin
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