Small business insurance offers peace of mind to entrepreneurs and small-business owners by protecting their most valuable investment: their business. Here's a brief guide to how small business insurance works, who needs it, what types of small business insurance exist, and how you can secure appropriate and cost-effective coverage.
When Do I Need Small Business Insurance?
Many entrepreneurs know (or learn the hard way) that in order to start a business, they need three things: an idea, money, and protection. Small business insurance falls into the third category – protection – and helps business owners avoid losing everything they build with the first two.
So why does a business need protection? Because every day, business owners face a variety of risks that threaten their financial wellbeing, including:
- The risk of property damage from fire, theft, storms, and other natural disasters
- The risk that the products or services they sell injure a client or cause financial loss, and prompt that client to sue the business
- The risk that a client or supplier is injured on their premises and sues
- The risk that a supplier shuts down or becomes unable to ship essential products, forcing the business to close its doors
Any of these events could lead to costly repairs, expensive court cases, or lost business time. Without small business insurance in place, you're forced to shoulder all these costs out of pocket. With small business insurance, however, the insurance company handles the costs, allowing your business to continue operating despite the unexpected interruption.
How Does Small Business Insurance Protect My Company?
Small business insurance works like the types of insurance coverage you're already familiar with: you exchange a small payment in the present (called a premium) for the promise that you won't have to make an enormous payment in the future.
Take Property Insurance, for example: you pay a premium every month to protect your business assets. After several months, a fire destroys your building. Because you had a Property policy in place, though, you don't have to worry about funding the cost of replacing your equipment or relocating. Instead, your insurance company covers those costs, up to the limit of your policy.
Other types of small business insurance fund not only actual damages, but also the costs associated with defending yourself against claims that your business caused those damages. For example, if a client injures herself on your business property and sues you for the related medical costs, your General Liability Insurance would cover the cost of hiring a lawyer to defend your business against the claims. It would also pay for any damages for which your business is found liable.
What Type of Small Business Insurance Do I Need?
A small business's insurance needs depend on its industry, customer base, location in the country, and a number of other factors. An insurance agent can explain in detail which types of coverage will be most beneficial to your business, but in the meantime, you can get an idea of what various types of small business insurance cover below.
- General Liability Insurance (aka Commercial General Liability, or CGL): This is the baseline of coverage for any business. It protects against claims that your business caused personal injury or property damage to clients or other third parties. Benefits from a GLI policy typically include payment for court costs and payments for settlements or judgments for which you're found liable.
- Property Insurance This coverage protects your business property (including an office or storefront, inventory, and equipment) from theft, damage, or loss. Small business Property Insurance policies vary widely in the type of coverage they offer and assets they protect, so be sure to ask your agent if you're protected for the risks your business faces.
- Business Owner's Policy: A popular policy type for small businesses, the Business Owner's Policy (aka BOP) bundles GLI and Property Insurance for a single discounted premium. Your insurance agent can help you determine whether you meet the eligibility requirements to qualify for a BOP.
- Workers' Compensation Insurance: Mandatory in many states, Workers' Comp Insurance protects your business from the costs associated with workplace injuries or illnesses. In the event that one of your employees becomes sick or injured on the job, your Workers' Comp policy will pay for the costs of defending yourself against the employee's claim as well as any damages (medical bills, medications, etc.) you're found responsible for covering.
- Errors and Omissions Insurance: Also called Professional Liability or Malpractice Insurance, this type of coverage pays benefits in the event that a client alleges that your professional work (including advice you gave or products you sold) caused physical injury or financial loss. As with other types of small business insurance, E&O coverage pays for the cost of your legal defense as well as any actual damage.
- Umbrella Insurance: This type of insurance allows you expand the coverage limit on existing insurance policies. For many small businesses, purchasing a single Umbrella Insurance policy is more cost-effective than increasing the limit on several policies individually. Note: Umbrella Insurance cannot increase the limit on an Errors & Omissions policy.
- Cyber Liability Insurance: This coverage protects businesses against the costs of data breaches and related cyber incidents that expose your clients' sensitive information.
How Do I Find Small Business Insurance for My Business?
When you're ready to find out how to protect your business with small business insurance and how much your insurance policies are likely to cost, you can get more information in one of two ways.
- Talk to an insurance agent with expertise in your industry. When you speak with an insurance agent who has experience working with small businesses in your field, you'll benefit from a wealth of knowledge about how various types of small business insurance can protect a business like yours. Insureon's agents are trained by industry to provide helpful, relevant guidance to the small-business owners they protect. Bonus: talking with a real person lets you ask questions get direct answers about the specific challenges you face.
- Complete an online application for free insurance quotes. When you fill out our online application, you'll receive free quotes for small business insurance in your email inbox. You can then compare these quotes at your convenience or talk to an agent about choosing the one that makes the most sense for your coverage needs and your budget.
Ready to protect your business? Complete our quick online application today!