Are you looking to start your own business? Have you thought about business insurance?
Small business insurance is one of the most important and beneficial steps you can take to protect you and your business. Small businesses of any kind—food trucks, wedding photographers, estheticians, caterers, and everything in between—are susceptible to risks that can carry a hefty price tag.
Keep reading to learn the basics of business insurance, five reasons why you need it, and a few common types of business insurance you should consider.
What is small business insurance?
Small business insurance protects your business from accidents and risks that are often out of your control. It’s a compilation of insurance put into a policy with the intention of protecting your business and saving you money.
The types of coverage you use will vary depending on your business operations and your specific needs. Rather than purchasing separate policies, you can often work with insurance companies to create customizable coverage so you only pay for what you need.
Common insurance needs for most small businesses include:
- General liability insurance
- Product liability insurance
- Tools and equipment insurance
- Damage to premises rented
- Workers’ compensation
5 reasons to insure your small business
Not convinced that you need small business insurance? Here are a few key reasons why it’s so important for business success.
1. Saves you money
When you purchase an insurance policy for your small business you’re creating a safety net of coverage. While you may be spending money initially, you’ll typically save money if you end up in a situation that insurance covers.
When it comes to making insurance claims you never know what you’re going to get. Some claims could be small and inexpensive, while others could have the potential to drain your financial resources. Small business insurance can get ahead of the cost, sometimes mitigating or even eliminating the cost of a claim.
In a study done by Insureon, they discovered that 32.5% of small businesses will experience an incident that insurance would cover in a 12-month period. That is almost ⅓ businesses a year.
For example, if you work as a massage therapist you face risks every day, simply because you work closely with other people. A client could slip and fall in your office, the oils or lotions you use could lead to an allergic reaction, or your table could break leading to costly claims.
Without insurance, you could be looking at thousands of dollars in defense costs, judgments, and other expenses. With massage therapy insurance, you simply file a claim, and insurance can take care of it for you—saving you money.
No matter what kind of small business you run, insurance can save you money in the case of non-preventable accidents. If your business equipment is stolen or damaged you could be looking at thousands of dollars in repairs or replacement. This cost, in addition to the time you aren’t working, can put you out of a lot of money.
Insurance helps minimize these out-of-pocket expenses, allowing you to continue doing what you do best—running your business.
2. Increase your professionalism
Just like writing a business plan shows investors that you’re serious about your business—having small business insurance actually increases your professionalism and credibility as a business owner.
With insurance, you are better equipped to handle the crises that lead to claims. You have an insurance provider who can walk you through the steps of paying out your customer or repairing a broken piece of equipment. This shows your customers and clients that you are serious about what you do and the service you provide.
For example, 30% (20,000) of the Food Liability Insurance Program’s (FLIP) customers reported that having insurance helps them gain clients. FLIP sends their customers a badge that business owners can place on their site, letting customers know that you are an insured business.
Insurance can also help you land funding for your business. If you pursue a business loan or line of credit, the bank may ask to see a certificate of or proof of insurance. Providing that documentation helps you achieve stable credibility.
3. Protects your business
Unfortunately, there is very little anyone can do to completely prevent claims from happening. No matter how safe or cautious you are, accidents happen. Insurance provides a safe buffer so even when accidents happen, your business is protected.
Types of insurance coverages that provide great protection can include general liability insurance, professional liability insurance, tools and equipment insurance, and cyber liability insurance. There may even be industry-specific coverage that handles specialized business property or liabilities.
Take, for example, a wedding photographer who travels with several pieces of extremely expensive equipment. This equipment usually includes camera bodies, lenses, lighting props, and even backdrops. If something happens resulting in stolen equipment, camera equipment insurance protects their business by reimbursing the cost of the equipment.
Without this insurance, the photographer would be responsible to replace the equipment, as well as face time where they can not work due to the equipment being stolen. This situation is only one out of hundreds where small business insurance can help out.
4. Often required by law
Did you know that insuring your business may be required by law? If you have a business loan, lease, or rent a property for your business, then you may be required to provide proof of insurance.
While it is smart to insure your business whether it is law or not, your state may require it, like in the case of liquor liability and dram shop laws. If you are a restaurant owner who sells alcohol, it is required by your state’s dram shop law to have liquor liability insurance.
If you rent space from a landlord, you may be required to not only have insurance but to also list your landlord as an additional insured on your insurance policy. An additional insured is either a landlord or event organizer who requires you to list them on your insurance policy and your policy extends coverage to them. It is standard practice for landlords to require you to list them as an additional insured.
5. Offers peace of mind
When it comes to running your business, you have countless reasons to stress. Being financially liable shouldn’t be one of them.
There are so many facets to running a business: from payroll to everyday operations to interacting with customers, you have a lot on your plate as a small business owner. Small business insurance can provide peace of mind, allowing you to worry less about the consequences of claims and focus more on the joy your business provides its customers.
Types of insurance for small business owners
Business insurance can be a confusing subject with confusing terminology. Keep reading for a simplified explanation of what insurance is available for small businesses.
General Liability Insurance
Protect your business from the cost of third-party bodily injury and property damage claims. These claims can arise for your day-to-day business operations common claims can include a customer tripping over your business equipment and injuring themselves.
Tools and Equipment Insurance
Extends your insurance to the tools and equipment associated with your business. If you are a photography business this can include your camera equipment. If you are a food truck, this can include your deep fryers or ovens. The limits vary depending on your type of business.
Product Liability Insurance
Designed for businesses that are in the food industry. This insurance can protect your business from the cost of claims associated with a customer getting sick from the food you served them.
Workers’ Compensation Insurance
Great insurance to include on your small business insurance policy if you have employees. It may even be required by your state.
Commercial Auto Insurance
Important to add to your insurance policy if you have vehicles that are used for your business operations. This can include food trucks or delivery vehicles.
Liquor Liability Insurance
Essential and required insurance if your business serves or furnishes alcohol. It is even required by state dram shop laws. This insurance can protect you from the expensive cost of claims. These alcohol-related claims can often cost thousands of dollars in out-of-pocket costs if you don’t have insurance.
Damage To Premises Rented Insurance
Can protect your business from the cost of claims that arise from damages done to a rented space. This can be a photography studio or commercial kitchen, or space that you rent for your business. If you rent your business space, this coverage is essential to your small business insurance policy.
Cyber Liability Insurance
A fantastic addition to your insurance policy. With cybercrime on the rise, it is important to take the steps to protect your business. If you store information online on a tablet, phone, or mobile device, then this coverage should be on your policy.
Best places to purchase small business insurance
There are many options when searching for small business insurance. You’ll need to do your research and find a place that you trust and offers the coverage that your business needs.
Listed below are several industry-specific options worth looking into:
Prepare for your small business insurance needs
As a small business owner, you are faced with many challenges and insurance doesn’t need to be one. When you insure your business you are saving yourself time, money, and stress. It provides peace of mind, protects your business, and increases your professionalism in your field of business.
So don’t wait until it’s too late. Find the right small business insurance that serves the needs of your business—you won’t regret it.
Parker is a Marketing Content Writer covering the insurance industry and has been published by Southern Utah University and The Utah Shakespeare Festival. She has a bachelor’s degree from Southern Utah University in Communication with an emphasis on Public Relations and Content Writing. Parker enjoys everything writing and loves spending afternoons on the beach with a good book.
Read the full article here
