Many small business owners, especially home-based entrepreneurs, often skimp on insurance. While this investment might seem like an unnecessary cost, it’s well worth it should a negative situation ever arise.
If you’re wondering what type of insurance you should obtain for your business, here are seven examples to keep in mind.
Extended Homeowner’s Insurance
If you have a home-based business and homeowner’s insurance, you might think that you’re covered. However, most home insurance properties don’t have the proper clauses to cover business activities. In fact, your policy might have clauses that ensure your provider isn’t responsible if business activities take place on the property.
Reach out to your insurance provider and ask what extended coverage you’d require to cover your home-based business. This is especially important if you have people visiting your home or specialty equipment on site. Renter’s insurance and property insurance also fall under this umbrella — always double-check that you’re truly covered.
General Liability Insurance
If you only invest in one type of coverage for your small business, get general liability insurance. This will cover you if someone gets injured on your property. For example, if someone trips on your stairs when coming to enlist in your coaching services, general liability insurance would cover you.
General liability insurance also covers property damage. For example, if you run a jewelry cleaning business and break a clasp on an expensive necklace, your insurance would cover the cost.
Commercial Auto Insurance
Commercial auto insurance is integral if you’ll be using either a company vehicle or your personal vehicle for business purposes. The need is exacerbated if an employee will be operating the vehicle for your business needs.
While auto insurance claims might seem straightforward, there are often a lot of nuances to consider when they occur. For example, if your company vehicle is in a truck accident, you may spend months dealing with numerous parties, including the truck driver, the truck driver’s company, and their insurance provider.
Having the right insurance in place helps recoup the costs of a motor vehicle accident and ensures that you aren’t personally liable for an injured employee.
Professional Liability Insurance
Professional liability insurance is separate from general liability insurance. If you run a home-based service-based business that doesn’t entail in-person visits or the exchange of goods, this is the most important coverage for you.
Professional liability insurance covers consultants and entrepreneurs who fail to deliver on a promised service for one reason or another. For example, if you miss a deadline that impacts a client’s income potential, they could sue you for the lost revenue. Your PLI would cover a situation like this.
Product Liability Insurance
Product liability insurance is similar to professional liability insurance, except for product-based businesses. If the jewelry you make becomes a choking hazard for a young child, this is the insurance that would protect you. The same applies if you create a product that breaks or doesn’t work as promised.
Life Insurance
Life insurance is a must for entrepreneurs, especially those who have a lot of personal money tied up in the business. In the event of your death, having a life insurance policy ensures your costs are covered rather than leaving your family with undue financial stress during an already difficult time.
Business Interruption Insurance
If 2020 has taught business owners anything, it’s that nothing is certain. Many small businesses are suffering after the coronavirus pandemic has forced them to shut down without financial compensation, leaving them unable to pay their bills.
Business interruption insurance was designed for the rare catastrophic events that sweep through the world. From wildfires to global pandemics, business interruption insurance helps guarantee that you’ll have a business to come back to when an event has passed.
Small business owners rarely have the luxury of paying for thousands of dollars worth of insurance per year. Be sure to invest in the basics to protect your assets and the longevity of your enterprise.
