Business Insurance: Do You Have the Right Kinds?

November 9, 2016

If you don’t have all of the policies you need, you might have to deal with some serious consequences someday.

As a small businessperson, you probably scrutinize every expense carefully. Can we afford it? Do we really need it? What will happen if we don’t buy it?

When it comes to business insurance premiums, the answer to that last question should be obvious. Being inadequately covered by the right kinds of business insurance can spell financial hardship, legal troubles – even the closure of your company.

Let’s take a look at the policies that small businesses typically purchase. Ask yourself these questions:

  • Do you provide professional services that could be subject to lawsuits claiming malpractice, negligence, etc.? You may be in a state that requires professional liability insurance for some individuals and businesses. If you’re not, you should consider it anyway.
  • What is your business structure (sole proprietor, LLC, etc.)? You may need to look at some specific options here, like Key Person life insurance.
  • Could you be sued for injuries, accidents, or other business-related liabilities? Anyone could. General liability insurance is designed to help protect you in those legal situations.
  • Do you manufacture products? Even if you don’t, are you involved with them as a wholesaler or distributor or retail sales site? You probably need product liability insurance.
  • What state do you live in? It may have its own business insurance requirements. You can search for your state on this page hosted by the National Association of Insurance Commissioners (NAIC).
  • Do you have employees, or are you planning to? Then you either know—or need to know—about Workers’ Compensation, Unemployment Insurance Tax, and, possibly, Disability Insurance.
  • Where are your company’s offices? If you work from home, consider home-based business insurance, since your homeowners’ policy may not cover your business-related losses in the event of property damage from storms, fires, vandalism, etc. If you rent or own a physical structure, you need to have commercial property insurance.

Sounds like a lot of insurance. It is. And when budget time rolls around (especially in lean years), you may be tempted to let one or more existing policies lapse.

It is possible that someone sold you a policy that you don’t need. But it’s more likely that you’re missing out on coverage that could end up saving your business. The U.S. Small Business Administration (SBA) explains your options in more detail here. It can also recommend an advisor in your area.

If insurance premiums are going to create serious financial difficulties for you, maybe we should consult with you on your overall business plan and your cash flow situation. We can also look at how realistic your budget is and provide guidance there, too. Insurance is just one element of your company’s safety net – but it’s a big one.

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