As a new business owner, you may be wondering what steps to take to increase your odds of success. Our how-to series for small business owners focuses on the early tasks to complete, allowing you to focus on other aspects of running a company. Learn more about business insurance and why it matters, along with 3 steps to secure business insurance for your company.
What is Business Insurance?
Business insurance is a policy that offers protection against the unexpected costs associated with running a company. Depending on the policy, it may include coverage for legal issues that arise, such as lawsuits or disputes between owners, natural disasters and the ensuring damage to the physical location, or accidents that may occur. Additionally, business insurance often provides protection for all who work for the organization.
Depending on where your business operates, securing insurance may be a requirement. Various states have laws in place to protect businesses and customers, requiring the purchase of specific types of coverage.
Federal law requires any business with employees to maintain:
- Workers’ compensation insurance
- Disability insurance
- Unemployment insurance
Learn more about the requirements for your small business on your state’s business website.
Why is Business Insurance Important?
The main reason that business insurance is so important is that it provides protection against incidents that could financially devastate the company. Even a single lawsuit against an organization could bankrupt it without sufficient coverage in place. Protecting yourself and everything you have built is a must, and it’s something that business insurance can provide.
Of course, securing proper coverage is also required by law. Failing to do so could result in facing stiff penalties and fines that eat into your profits or impact your ability to keep the company running at all.
9 Types of Business Insurance
Understanding the nine main types of business insurance can help you determine which policies may apply to your company:
- Workers’ compensation: Required by federal law, this type of coverage protects employees who suffer injuries while in the workplace.
- Disability: Required by federal law, this type of coverage replaces part of an employee’s income if they become unable to work due to disability or illness.
- Unemployment: Required by federal law, this joint program between federal and state governments offers economic stability to members of the workforce who lose their jobs.
- General liability: Nearly any type of business can benefit from this type of coverage, which offers protection against financial losses caused by medical expenses, bodily injury, lawsuits, slander/libel, and settlements.
- Commercial property: When an organization has a significant amount of assets and/or property, this type of coverage protects those items. It may cover damage caused by natural disasters, vandalism, and other situations.
- Home-based business: If you run your business from home, it’s unlikely that your homeowners’ policy will offer sufficient coverage. Adding this rider provides extended protection for equipment and liability.
- Professional liability: This type of insurance is important for companies that offer services to customers, protecting against losses caused by negligence, errors, and malpractice.
- Product liability: If your company manufactures, distributes, wholesales, or retails a product, this coverage protects against financial losses related to defects that may cause bodily harm or injury.
- Business owner’s: A business owner’s policy is a package that bundles multiple coverage options, simplifying the buying process and potentially reducing costs.
3 Steps to Secure Insurance for Your Small Business
Follow these steps when your business is ready to be insured.
Step one: Review your business needs
Not all coverage is necessary for every company. Review the needs of your business, as well as what’s required by federal, state, and local regulations. Identify which coverage options will be most useful for your organization.
Step two: Shop around
The next step is shopping around. Simply looking at one offering won’t give you much information, and you may end up overpaying for coverage. Various insurance companies work with business owners to provide the necessary insurance coverage.
If you know anyone in your area who has gone through this process, request references and recommendations. You may want to work with an insurance broker who has access to multiple insurers and can give you several options.
Step three: Compare and make a decision
After you have compared the options available to you, the final step is deciding on the coverage that meets your needs while fitting into your small-business budget. Don’t forget to review at every renewal to ensure that the policy still meets your needs.
Now that you know how to secure business insurance for your company, you can take the next step and maintain compliance with legal regulations around protecting yourself, your business, and your employees.
Explore our other posts in the “how-to series for small business owners:”
