It takes one risk exposure to turn a business owner’s dreams into a financial nightmare. Here are 5 types of insurance your business may need to mitigate that exposure.
How Much Insurance Do I Need for My Business?
For business owners, the ambition of growing a business to the next level is all-consuming, but the rewards are well worth it – financial independence, leaving a legacy, social status, etc. However, with each rung up the success ladder a business owner climbs, the breadth of their risk exposures expands. In most cases, there is only one way to build a particular business, but there are myriad ways it could come crashing down. It takes just one risk exposure to turn a business owner's dreams into a financial nightmare.
Fortunately, most common business risk exposures can be transferred to an insurance company. These are the five types of insurance your business may need right now.
Liability Insurance Coverage
The most significant risk exposure for business owners is liability claims. Business owners need to protect their assets with various types of liability insurance coverage, including:
General liability insurance: Commercial general liability coverage protects your business against claims resulting from worksite injuries (customers or employees) or damage caused by employees. General liability coverage also covers legal costs, including the judgment or settlement amount.
Worker's compensation and employer's liability: Worker's compensation is compulsory coverage in all states protecting the business against employee injury or death claims. While worker's comp is a "no-fault" remedy, employer's liability coverage protects the business against liability claims made by employees, family members, or third parties seeking legal remedy if the injury or death results from employer negligence.
Product liability insurance: Protects product manufacturers against liability claims resulting from injury or death caused by their products.
Indemnity insurance: Protects the business against claims of financial harm due to negligence, mistakes, or failure to perform. Professionals in legal and financial services need errors and omissions (E&O) coverage, and other professions and occupations, such as consultants and contractors, should carry indemnity insurance.
Umbrella liability coverage: Protects any individual against personal liability claims.
Property Insurance
For businesses that own or lease their space, property insurance covers equipment, signage, inventory, and furniture in the event of a fire or theft. Standard property insurance policies don't cover losses due to acts of nature, such as floods and earthquakes.
Business Interruption Coverage
Business interruption insurance protects a business against losses resulting from temporary closings due to fire or other events or circumstances covered by the policy. Most business interruption insurance reimburses the company for lost profits (net profits) and ongoing expenses. Other policies could reimburse the cost of doing business at a different location because the original site can no longer be occupied and used for some time.
Business Overhead Expense Coverage
Another way your business could be forced to stop operating is if you or a partner becomes disabled. A business that can only sustain itself at the hands of one or two key people can be vulnerable to significant financial hardships should they become disabled and unable to contribute as needed. Business overhead expense coverage will cover the business's operating expenses during an extended disability.
Key Employee Insurance
It's not uncommon for a growing business to rely heavily on the skills, expertise, or reputation of a valuable key employee. The employee could be a business partner, the person behind a key product or service, or someone who has personally built substantial goodwill among the business' most important customers. The death of a key person in these situations could result in the loss of revenue, and finding a replacement could be very expensive.
Update Your Coverage Regularly
Once you have policies in place, review them at least once a year to be sure your needs continue to be met. Check whether existing policies should be changed and whether you need to add new types of coverage.
New products and services: If you have added new products or product lines, or have begun offering new types of services, make sure your liability insurance adequately protects you against claims in those areas.
Increased sales and expenses: If sales are up, business interruption coverage may need to be boosted. If higher sales resulted in adding employees, check your worker's compensation coverage. Also, as your company grows, it may make more sense to protect key executives and directors from liability and lawsuits.
Additional equipment or vehicles: If you have purchased new equipment, property, or real estate, make sure your property coverage is up to date.
Recent articles:
Small Business Owners Need an Integrated Approach to Post-Pandemic Financial Planning - Business owners need a team-based, integrated financial strategy to manage complex personal and business finances effectively.
How to Build a Strong Brand Identity on a Budget - To build a strong brand on a budget: define your brand, create a visual identity, develop an online presence, and leverage word-of-mouth.
The Future of Remote Work: Tips for Small Businesses to Thrive - Remote work is here to stay, and with strategic planning, small businesses can thrive by embracing flexibility, technology, and strong communication.
Navigating the Gig Economy: Opportunities and Challenges for Small Businesses - The gig economy offers small businesses flexibility and cost-efficiency but requires careful management of legal risks, workforce stability, and quality control.
Sustainable Business Practices: How Small Businesses Can Make a Big Impact - Small businesses can drive significant change by adopting sustainable practices like energy efficiency, waste reduction, and community support, building a better future for all.
10 Essential Free Tools for Small Businesses - Free tools like Trello, Canva, and Slack empower small businesses to streamline operations, boost productivity, and drive growth efficiently.
Previous Articles:
- How to Leverage Social Media for Your Small Business in 2024
- The AI Advantage: How Small Businesses Can Thrive in the Age of Intelligence
- Shielding Your Business: Essential Insurance for Risk Management
- How Outsourcing Can Help Your Small Business Grow
- Securing Your Data: A Cloud Security Checklist for Small Businesses
- Mastering Cash Flow: How Banks Empower Small Businesses with Cash Management Tools
- Optimizing Productivity for a Remote Workforce
- Digital Strategies: The Engine of a Virtual Distribution Strategy
- Attracting and Engaging Gen Z: The Future of Your Workforce
- Managing Cash Flow for Business Prosperity
- How to Position Your Bank as a Trusted Advisor for Small Businesses—And Why It Matters
- Business Owners Need a Complete Risk Management Plan
- Preparing Your Business to Borrow
- Is Your Business Prepared for Generation Z?
- Small Business Trends You Don’t Want to Miss in 2024
- Ideas on How to Improve the Customer Experience
- Do You Use Website Analytics to Learn About Your Customers’ Interests?
- 5 Strategies to Incorporate into Your Business for 2024
- The Benefits of Mobile Banking and Remote Deposit Capture
- Should You Have a Blog on Your Website?
- Best Practices for Protecting My Business Online
- Using ACH to Improve Cash Flow
- 10 Ideas to Help You Recruit New Talent
- How AI Could Improve Your Business
- Using a Small Business Loan to Expand Your Services
- Local, State, and Federal Resources for Your Business
- Security Essentials for Keeping Business Data Safe
- Leveraging Your Bank’s Cash Management Services to Improve Your Business
- When is the Best Time to Obtain a Business Loan?
- How Much Insurance Do I Need for My Business?
- Incorporating the Latest Merchant Services Technology for Your Business
- A Checklist for Getting Your Small Business Tax Compliant
- How Third-Party Data Can Help Target Marketing
- Is Your Small Business Taking on too Much Debt? Steps to Take to Pay it Down More Quickly
- Leveraging Digital, Direct Mail, and Social Media to Drive Business Customer Acquisition
- Businesses Should Plan Ahead for Year-End Tax Strategies
- Cash Flow Management Tips for Small Businesses
- Recruiting Top-Tier Talent in a Tight Job Market
- Sales or Marketing – Banks Need Both to Grow Revenues
- The Biggest Security Threat to Your Business
- How to Prevent Employee Fraud in Your Business
- There's Still Time to Claim the Employee Retention Credit. What is it, and How to Qualify
- Preparing Your Business to Borrow
- Insurance Essentials for Managing the Many Small Business Risks
- Employers are finding that remote work can be an effective way to increase productivity and lower cost
- Don't Let Your Business be the Next Ransomware Victim
- Taking Advantage of Bank Cash Management Technology
- How to Take Your Digital Marketing to the Next Level
- How Annual Assessments Can Prevent Fraud in Your Business
- How to Position Your Bank as a Trusted Advisor for Small Businesses - And Why it Matters
- Getting to Yes with a Solid Loan Proposal