What Should Business Owners Know About Insurance?

Written by on June 9, 2020 in Business with 0 Comments

As many businesses have faced significant challenges in recent months, it’s a time when they may be evaluating insurance or a lack thereof.

Coronavirus initially led to massive shutdowns of many non-essential businesses, leading business owners to wonder about the coverage afforded to them by their business interruption policy. Then, as the economy was opening up, there was civil unrest in many major cities and towns around the country.

As is the case with an accident leading to a car insurance increase in premiums, it’s possible these events could cause business insurance to be more expensive. Even so, you may realize just how important it is to be fully and properly insured during times like what we’re facing now.

The following are some of the important things to know about business insurance, including what you might need to know if you’re a solopreneur.

What Is Business Insurance?

Business insurance refers to a set of policies that protect your business from different types of financial loss.

Some of the factors that play a role in what you need include how many employees you have, whether you have business vehicles, and the materials you handle.

You may need to work with several companies to get the needed coverage for relevant types of risk.

Commercial business insurance can include:

  • General liability insurance which covers claims stemming from injuries to other people
  • Professional liability and malpractice insurance which might cover losses due to negligence including advice and services that lead to another person’s injury or loss
  • Product liability insurance can protect against products that are faulty and losses that can occur because of using a faulty product
  • Property insurance covers loss or damage to a commercial business because of storms, fires, and other causes
  • Commercial vehicle insurance covers work vehicles and drivers for liability, property damage, collision, personal injury, and comprehensive coverage
  • Loss of income insurance is one that’s being discussed quite a bit right now. Loss of income insurance will cover your business expenses like employee wages and rent if you’re unable to operate your business.
  • Key person insurance covers lost income that comes from someone integral to the business or the head of the business being incapacitated or passing away

Commercial General Liability

If you’re a solopreneur or a business operator of any kind, you should plan on purchasing a Commercial General Liability Policy. Commercial General Liability coverage is arguably one of the most important types of insurance policies for anyone to have when they operate a business, regardless of the size or scale of said business.

A CGL policy protects your business assets from Property Damage claims and Bodily Injury claims stemming from your business, including your products, premises, and operations.

Bodily Injury coverage is similar to a car insurance policy. If you’re interacting with someone through your business or the course of doing business, and they get hurt, they may have a claim, and Bodily Injury coverage protects you as the business owner.

There’s something even soloprenuers might want to think about as well called Completed Operations coverage. If you complete a contract and months later your customer is injured as a result of the work you did, you would be protected by Completed Operations coverage.

What Are Your Legal Obligations?

Before you explore specific types of business insurance policies, it’s smart to understand your legal obligations and requirements.

These vary significantly, not just depending on your industry but also state and local laws.

As an example, if you rent a commercial space for your business, the landlord you rent from may require general liability insurance. General liability insurance protects against property damage or injuries. If you're a business owner you can compare cheap public liability insurance here. You might also have to purchase workers’ compensation insurance.

Along with going over your legal obligations, as you’re exploring business insurance, you should also think about the risks that are specific to your industry.

For example, if you are a freelance accountant, you’ll face different liabilities than if you are a builder of custom furniture.

When you have an awareness about what the risks are in your industry, you can reduce your risk of overbuying or underbuying insurance products.

Errors & Omissions (E&O) Policy

The term Errors and Omissions insurance is also known as Professional Liability Insurance, and it can serve as a broad safety net for you and your business, including if you’re a solopreneur. An E&O policy will protect you against negligence and malpractice claims, and it’s different from general liability insurance.

With general liability insurance, your policy would cover claims made for damage to property or a person. With an E&O policy, you would have protection against claims made relating to things like infringement of intellectual property or data breaches.

Cyber Protection

Small businesses are often the target of hackers and cybercriminals, so it’s wise to think about protecting yourself and your assets here too.

For example, there is something called Cyber/Network Liability coverage that will protect you if you’re facing a security breach and information is stolen.

Coverage vs. Cost

The biggest thing business owners tend to think about with insurance is how to balance the coverage they need versus cost.

It’s tempting to skip out on coverage you may need but don’t want to pay for. Unfortunately, doing so can lead to far more financial damage.

When you go with a cheaper policy, along with the coverage being limited, the insurance carrier may not offer a high level of service. You may find they are slow to process claims in a time of need, for example. They may also unexpectedly raise your premiums.

Yes, you need something you can afford, but don’t make budget your number one priority.

Finally, if you work at home and that’s where you operate your business, you’ll need to ensure you have a strong homeowner’s insurance policy. That’s a good starting point for home-based professionals and entrepreneurs who want to protect themselves and then depending on your industry or the scope of your business you can build out from there.

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