If you’re running a small business, you may wonder if it’s worthwhile to buy business insurance, especially if you’re just starting out and don’t have any employees yet, or even a commercial premises to do business from.
The truth is that running a small business opens you up to a lot of risk. You could find yourself defending a lawsuit or covering employee medical expenses for injuries sustained on the job. Federally, you’re on the hook for unemployment, workers compensation, and disability insurance if you have employees. Your state may have its own laws about what business insurance you’re required to carry. In some circumstances, however, you may be able to put off or avoid getting business insurance altogether. Let’s take a closer look at who does and doesn’t need small business insurance.
State and Federal Laws Dictate Business Insurance Requirements
Under federal law, you’re required to carry workers compensation insurance, disability insurance, and unemployment insurance if you run a business that hires employees. Your state may provide some additional legal requirements for small business insurance. Make sure you know the law in your state so you can get the coverage you need to avoid fines and other penalties, in addition to protecting your business investment and your workers.
Business Insurance Can Protect You from Huge Financial Losses
Running a small business can mean investing a lot of money in equipment, facilities, inventory, and training. A natural disaster, flood, fire, data breach, or break-in could cause damages significant enough to put you out of business entirely. Carrying business insurance is a way to protect your investment from the financial losses that can occur due to unforeseeable misfortune.
Of course, destructive events aren’t the only threats to your business continuity. Small business insurance can also provide a layer of liability protection beyond what your LLC structure can provide. If an employee or customer gets hurt on your premises, you could be on the hook for their medical expenses. If one of your products turns out to be defective, you could find yourself embroiled in a lawsuit. You’ll need small business insurance to defray those costs. And, of course, if you’re practicing medicine or law, you’re going to need professional liability insurance to protect you from negligence and malpractice suits that may arise when customers aren’t completely satisfied with your services.
Business Insurance Protects Your Customers and Employees, Too
Small business insurance provides your employees and customers with the protection they need to have a good experience with your company. Employees need protection against work-related disability and injury. They need to know that if they get laid off, they’ll be able to collect unemployment insurance. And customers need to know that if they’re hurt by a defective product or in an accident on your premises, that your company will be able to step up with the compensation they need to recover.
Get the Right Kind of Insurance for Your Small Business
When it comes to buying small business insurance, it’s important to get the right coverage. There are several kinds of insurance available to small business owners, including:
- General liability insurance, which protects against financial losses due to slander and libel, property damage, bodily injury, lawsuits, and judgments or settlement bonds
- Professional liability insurance, which protects against losses related to professional error, negligence, or malpractice
- Home-based business coverage, which typically exists as a rider on your home insurance and will provide a limited amount of coverage for equipment used in a home-based business
- Product liability insurance, which provides coverage against losses due to product defects that cause injury to customers
- Commercial property insurance, which covers damage to your business premises from vandalism, storms, floods, fires, earthquakes, and civil unrest
- Business owner’s policies, which provide general coverage for small business owners in need of liability, workers comp, disability, and unemployment insurance
Before you talk to an insurance representative, assess the liability risks your company faces. If you’re just getting started, are still working out of your home, and don’t have any employees yet, business insurance may not need to be a priority, as long as you don’t face any professional liability. If you’re offering services that don’t present much risk to your customers, like virtual services such as copywriting or tutoring, you probably don’t need business insurance.
On the other hand, you may need more than coverage for workers comp, unemployment, and disability. For example, if you live in an area prone to wildfires, hurricanes or other damaging stores, or earthquakes, you may need additional insurance on your equipment and premises to protect from losses due to natural disasters.
You have a lot of money invested in your small business, and you need to protect that investment. Business owners insurance can help you afford the benefits your employees need and protect you from liability. It’s the right thing to do.
