A whopping 80 percent of small businesses don’t have any form of insurance.
As a small business owner, it’s easy to see why you might avoid purchasing business insurance. Perhaps you’re running on a tight budget, so you don’t have money to pay insurance premiums. Or you’ve got personal insurance and you think coverage extends to your business.
Regardless of your reasons, you’re making a big mistake. There are business risks left, right, and center, and any of those risks can cripple your business.
In this article, we’re telling you the different types of commercial insurance your small business needs to have.
1. General Liability Insurance
Every day, your business is exposed to a wide range of liabilities.
If you own a brick and mortar store, for example, every time a customer walks in to buy something presents a risk to your business. They could slip and fall, hurting themselves in the process. Or something could fall on them, causing an injury.
If you’ve got a delivery business, your vehicles are a risk to your business every time they’re out on the road. A driver could hit another motorist or pedestrian and injure them.
Any of these scenarios will result in your business needing to compensate the injured. Considering the sky-high cost of healthcare in the United State, a single accident can leave your business needing to pay out a lot of money.
Instead of paying out-of-pocket, did you know an insurance company can make the payment on your behalf? All you need to pursue general or business liability insurance. This policy provides coverage that protects your organization from various liability claims your business might face.
Keep in mind that general liability insurance isn’t unlimited. It will only cover your liability up to a certain amount, beyond which you’ll need to dig into your own pockets. In most instances, though, you’ll get up to $1 million dollars in general liability coverage annually.
2. Product Liability Insurance
While still on the subject of liability, if your business sells a physical product, you carry a big product liability risk.
Let’s say your company designs and manufactures power saws. Unfortunately, a manufacturing defect causes some of the saws to malfunction. If the malfunction leads to an injury, the user can sue your business.
What’s more, product liability claims are typically multi-million lawsuits. It’s unlikely that your small business will survive one, especially if it doesn’t have adequate product liability insurance.
Sure, general liability insurance will provide product liability coverage, but most policies offer a small coverage amount specifically for product injury claims. This is why it’s advisable to purchase a separate product liability insurance policy.
What if your business sells a service instead of a physical product?
Well, you won’t need to purchase product liability insurance, but you’ll need professional liability insurance. If you run a medical practice, for example, professional liability insurance will protect you from claims of medical malpractice or negligence.
3. Business Interruption Insurance
Some causes of business interruption are well-known. A fire or natural disaster, for example, can destroy your business premises, bringing your operations to a halt.
Other causes of interruption are unpredictable and unknown until they occur. COVID-19 pandemic is an example of how a health virus can cause massive business interruption.
How well prepared is your business for these interruptions?
While there are steps you can take to minimize your exposure to the various causes of interruption, the best way is to purchase business interruption insurance.
This business insurance policy will compensate you for the losses your business will make during an interruption. If you already have this policy and not sure whether it covers interruptions caused by the coronavirus, here is a resource where you can learn more and understand your situation better.
4. Property Insurance
An electrical fire, a windstorm, floods, or any other disaster can destroy the property that houses your business.
If you own the property, purchase property insurance. In case of damage, the insurance company will compensate you accordingly. This will ensure you have the money you’ll need to repair the damages.
If you don’t own the property, it’s still important to purchase some form of property insurance. This will protect your assets, such as office furniture, computers, and stock.
5. Workers Compensation Insurance
In most states, purchasing workers compensation insurance is mandatory for companies that have at least three employees.
Now, because it’s a legal requirement, you have no choice but to buy it. However, a mistake most business owners make is purchasing the minimum coverage. Don’t make the same mistake.
Yes, there are effective steps you can take to ensure your workplace is hazard-free, but you can never completely eliminate the risk of worker injuries. Even a single severe injury can quickly deplete your minimum worker’s compensation coverage.
What if another employee sustains an injury? With a depleted cover, you’ll have to compensate them out of pocket.
Purchasing more worker’s comp coverage than the minimum will come with higher premiums, but the cost is worth it. You’d rather spend a couple of hundred dollars more on a bigger worker’s comp policy than risk losing hundreds of thousands when several employees are injured.
Your Business Needs These Types of Commercial Insurance
Purchasing business insurance can seem like an unnecessary expense. However, the risks your business faces shouldn’t be ignored. They threaten the survival of your business.
You need to purchase business insurance. With this guide, you now know the various types of commercial insurance your business needs.
Keep reading our blog for more small business advice.