Types of Insurance Every Small Business Needs

As soon as a business owner opens his doors, there’s a certain risk of exposure and liability that he takes on in the business. Startups and new businesses are often shaky ventures that could be shut down by a lawsuit or disaster.

To avoid this type of closure, the business owner should have insurance coverage to protect his business. The type of insurance should be well researched in order to ensure that it has the right kind of protection, and it might be necessary to involve more than one type of insurance.

Property Insurance  If you have a physical location for your office, warehouse or factory, you will need to have insurance to cover it. Even if you lease the property, you need to protect your inventory, equipment, furniture and electronics from disaster. Before adding property insurance to your lists of insurance, be sure you understand what it will cover and what is not covered by the policy. For example, floods and earthquakes are not covered with standard policies, and some policies don’t cover loss of business due to power outages like businesses that were impacted by Hurricane Sandy in 2012. 

Business Interruption InsuranceFor those businesses that have been interrupted by a disaster, this type of insurance will cover the loss of income. While a disaster like a hurricane can cause water damage, it can also cause power lines to become damaged. Flood insurance will cover flooded basements, but it won’t cover loss of electricity while the city replaces and repairs power lines.When staff can’t make sales calls, bakeries can’t operate their ovens and retail stores can’t sell their products, business interruption insurance can compensate the business for the time that it can’t operate efficiently. This policy must be purchased separately from the property insurance.

Workers’ Compensation Insurance  If you have employees, you might be required to have workers’ compensation insurance. Laws vary by state, but many require a business with W2 employees have to have coverage. To cover yourself in the event that an employee gets hurt, you’ll want to have at least minimum coverage in place.Workers’ compensation insurance provides medical benefits and wage replacement for those injured on the job. With workers’ compensation coverage, you won’t have to worry about being sued by an employee who might not have adequate medical coverage or will miss work due to being injured on the job.

General Liability Insurance  General Liability insurance is especially important if you visit client’s or customer’s homes as a service provider. If you’re a heating and air conditioning company that sends technicians out to service heating and cooling units, you’ll need this type of insurance. Your technician might scratch a wall while moving the a/c unit into the home.
It can also cover plumbing companies that are entering homes to fix leaks and clogged drains. If a pipe bursts while the technician is working on it, that might not be covered by the homeowner’s insurance. They could come after the company for liability. General liability insurance will cover those kinds of incidents.

Commercial Auto Insurance  A policy like this will cover all vehicles that transports employees, products or perform services. It’s vital that damage and collisions are covered with the right auto insurance to avoid lawsuits and serious medical bills due to injuries.

When you have employees who drive their own vehicles, you’ll have to have auto liability that will cover them while performing their duties without adequate coverage. An agent will help you find the right policy for your business needs.

A policy that is recommended by the Small Business Administration is a Business Owner’s Policy, which is a separate policy that will combine some coverage like general liability, business interruption and property damage. A BOP can simplify the process by not requiring you to purchase five to six different policies. You can combine the parts you need into one coverage package.

Assess the type of business and coverage that you’ll need before finding a reputable insurance company. The agent will help, but you should be an informed buyer who understands the risks associated with your specific business.

Author Byline

Michael Rogers is a key member of USInsuranceAgents.com’s team. Handling the position of the Director of Operations requires a unique combination of high sense of responsibility, creativity and solid knowledge. During those 5 years of professional experience in the insurance industry, Michael contributes his level of expertise as a leader and an agent to educate and secure coverage for thousands of clients.