What are the important types of insurance a new business owner should consider when starting their business? Why are these insurance options very important?
Starting your own business is a huge achievement that can be fulfilling on its own. However, you still need to manage the business to ensure it becomes profitable.
It is important to note that there are many risks and challenges that you will have to face as a business owner before you become successful. To protect yourself and your business from these risks, you have to buy insurance for each of those risks.
Insurance companies have designed insurance products to meet the unique coverage needs of different types of business owners. The following are common types of insurance policies that every new business owner needs to purchase:
1. Commercial Property Insurance
After investing a significant amount of money on equipment, furniture, office appliances, inventory and other types of physical assets, you need to purchase property insurance to protect them.
The ideal insurance policy should be able to protect your property from fire damage, flood damage, storm damage and vandalism among other things. The ideal policy should provide coverage whether the property or equipment is leased or owned. That said, commercial property insurance will help prevent you from the closing shop in case your business is destroyed in a fire or natural disaster.
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2. Public Liability Insurance
We have a litigation-happy society nowadays. After all, you can be sued for almost anything. Therefore, you need to protect yourself from lawsuits. While some lawsuits may be merited, others are malicious, so you need to get a competent lawyer in addition to having public liability insurance.
Please note that public liability insurance is also known as general liability insurance.
Lawsuits are usually costly to defend and the court can award financially crippling damages to the plaintiff. Therefore, you should look for a policy that will provide you with sufficient protection. You will also need to know all the business litigation facts to further protect yourself and your business.
If and when you are sued by a customer, client or third party for something, your general liability insurance policy will pay the legal fees needed to fight the charges. If you lose the case, the policy will also pay the damages awarded by the court. This means that you can continue running your business without any financial losses. Just knowing that one lawsuit or multiple lawsuits can’t destabilize your business activities and by extension reduce its efficiency can go a long way in boosting your team morale even in difficult times.
3. Workers Compensation Insurance
In business, your employees are your greatest asset, but they can also be your greatest liability in some cases. Imagine getting sued by an employee who has been injured while at work. The employee can make numerous claims, including negligence on your part. When a claim is filed, the court may award an unbelievable sum as compensation. This may force you to close the shop.
Fortunately, work comp was developed to prevent businesses from closing shop due to employee-initiated lawsuits. Through workers’ compensation, employees get guaranteed medical benefits and wage-replacement benefits. In return, they undertake to forego their right to sue their employer for causing the injuries they sustained.
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Depending on your state, workers’ compensation insurance may or may not be mandatory. If it is not mandatory, you may have the option of purchasing a different accident protection plan similar to work comp.
4. Unemployment Insurance
As noted earlier, your employees may be your biggest asset. Therefore, you need to take care of your employees. One way to do this is to ensure they are properly covered against every possible risk. In case of job loss, you do not want your employees to suffer, so you need to buy unemployment insurance for them.
It is important to note that unemployment insurance can also help you attract and retain the best talent, so it can help boost your chances of success in the industry. You may want to shop around to find the best insurance provider for your needs.
5. Vehicle Insurance
If you are in the wholesale or retail products industry, you will most likely need a vehicle to transport these goods. Be sure to insure your vehicle as well as the cargo it carries because you never know when an accident may occur.
In case of an accident, you should be compensated for both the damages on your vehicle as well as the cargo damaged or lost in the incident. Therefore, you have to shop around for the best vehicle insurance policy for your business needs.
6. Professional Liability Insurance
This is also known as errors and omissions insurance or E&O insurance. It is meant to protect businesses that offer professional services to the public from claims of inadequate services, incomplete service, wrong service and claims of negligence.
If you offer professional services in your business, you should buy professional liability insurance to ensure you are not exposed to any unnecessary business risks.
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7. Business Interruption Insurance
Interruption of business operations can occur due to many things. For instance, a natural disaster may occur, and this may force you to close shop for an extended period of time. By purchasing business interruption insurance, you will be protecting your business from losing income when you have to close shop for an extended period of time. It can even protect your business from lawsuits if you are unable to fulfill contracts due to business interruption.
These are just some of the different types of business insurance policies that every small business needs to have. Ideally, you should get a bundled policy from a reputable insurance provider. This is important as it can help you save a significant amount of money. Be sure to take time to effectively compare what different insurers have to offer before making a commitment.
By working with an independent insurance broker, you can easily find the best insurance company and business insurance products for your business. The ideal broker should be licensed. They must also have many years of experience providing businesses with suitable insurance policies.
In addition to that, the ideal firm must have a great reputation. Therefore, you will have to go over online reviews written by industry experts as well as the previous clients of a broker. You will also need to check how different firms have been rated before you make a commitment. Before you can make a commitment, be sure to also compare the premiums and coverage limits that come with a policy.
Mark Vanzo from Smart Business Insurance is a leading provider of well-researched news and advice for the Insurance industry. Mark has been in business for over 15 years and has dealt with hundreds of small businesses in that time.