Click here to get this post in PDF
Any company is exposed to a significant amount of legal liability associated with numerous business risks, including accidental injuries, theft, fraud, or natural disasters. Even worse, any of these risks can get a company sued and force business owners to ante up hefty legal fees.
This is why business insurance is made. Business insurance is primarily designed to protect business owners and their company’s assets from penalties, damages, lawsuits, and costly fees. Without insurance protection, a business’s future is unsecured.
Having the right insurance coverage is crucial for ventures of all sizes. However, when it comes to small business insurance, almost all niches are covered. Picking the right insurance coverage can be tricky then—but we’ve got you covered. In this article, we’ve curated various insurances that every small company should have, including those required by law.
1. General Liability Insurance
General liability insurance usually covers advertising damages, like when a competitor claims that your company’s marketing materials ripped off their intellectual property or slandered them. It also covers the costs of small parking lot collisions and other damages your business caused to another person.
2. Commercial Property Insurance
Commercial property insurance covers all the physical assets of your company, including documents, office equipment, furniture, interior, and exterior. It’s both critical for businesses that involve brick-and-mortar locations and even home-based platforms.
3. Business Interruption Insurance
Typically complemented with commercial property insurance, a business interruption insurance covers all the company’s expenses during the suspension of business operations. It covers the cash flow the business would have otherwise made during a power outage or, worse, a natural disaster. Myths on business interruption insurance is best explained in a Voss Law article here.
4. Business Owner Policy (BOP)
Business owners can purchase general liability, commercial property, business interruption, or any other supplement insurance in one enhanced insurance package called the business owner’s policy (BOP).
This policy is typically recommended for businesses that are renting a space and have equipment in it. It also protects against dishonest employee behaviors, too, such as stealing customers’ belongings or office equipment.
5. Unemployment Insurance
As its name implies, unemployment insurance covers employees’ lost wages when they’re out of work due to specific circumstances, such as the current COVID-19 pandemic. It’s paid as a portion of each worker’s salary, which is 0.6% of an employee’s pay for the federal rate.
Furthermore, millions of people are currently unemployed due to the pandemic. Naturally, they would file for unemployment benefits. Unfortunately, many states are still stuck with an immense backlog of claims.
What’s even worse is that other states made it harder to claim unemployment benefits. As a result, affected employees will have to resort to cash advance, tap into retirement accounts, or look for other financing aids.
6. Workers’ Compensation Insurance
Accidents sometimes occur at work, so getting liability insurances, like worker’s compensation, is deemed necessary. Companies can be sued if their working conditions are alleged to cause harm to the workers. It’s usually a state-mandated policy, so each state may have different costs, coverages, and other related variables.
Overall, a worker’s compensation covers an employee’s medical treatment and rehabilitation, compensation payments, lost wages, legal fees, and even death benefits. Furthermore, employers must cover the premiums, regardless of specific state requirements.
7. Disability Insurance
Much like unemployment insurance, disability insurance covers a worker’s lost income during the time they can’t work, such as during maternity. It’s also taken from each worker’s salary, which costs around 0.25–0.5% of their paycheck.
While workers’ compensation insurance is covered at a state level, disability insurance is federal-mandated. This kind of policy is particularly critical for companies that handle large-scale daily operations.
8. Professional Liability insurance
Small businesses should also get professional liability insurance, especially when dealing with your clients’ businesses. For example, your company was unable to get your client’s request on time due to uncontrollable circumstances, causing significant damages and losses to your client. Your client could sue you for that. If your client filed a lawsuit against your company by any chance, the professional liability insurance would protect you from that suit.
9. Cyber Insurance
Most businesses are associated with online activities these days. While it’s convenient to do business over the Internet, your company will be prone to Internet-based risks, like malware, cyber-attacks, and data breach. Cyber liability insurance coverage, or merely cyber insurance, can offset the costs of any cyber-related security protection and recovery.
10. Home-based Business Insurance
As the current pandemic shapes the new normal, a lot of small businesses are turning home-based, as well. If that’s the case, it’s crucial to ensure that you’re still insured while doing business at home. Home-based business insurance is designed to protect work-at-home employees against anything that’s not covered by a homeowner’s policy.
Different business insurances don’t only benefit employees, but also the company itself. Investing in insurance is like preparing for the worst that could happen to your business. If you’re financially ready to face possible risks, you’re more likely ahead of the competition in the labor markets. This preparation ensures your business’ survival in the years to come.
You may also like: Is Your Business Prepared for a Natural Disaster?
About the Author
Tiffany Wagner is a content marketer, mainly in the field of finance. She’s been sharing valuable content related to investments, insurances, asset management, financing options, as well as IoT applications in the financial sector.