How to Cover Your Assets: An Insurance Primer for Small Businesses

• There is no ‘one size fits all’ for business insurance. Each business is unique and policies should be curated to protect your specific assets within the context and scenario you operate in.
• When seeking information on which business insurance you need, trust experienced insurance experts who serve businesses like yours. 
• Business insurance is a long-term investment. You should maintain a lengthy relationship with your agent or broker and touch base with them every year.
• This article is for small businesses and entrepreneurs who have never purchased business insurance before and those who want to update their coverage.

No person or business likes to spend money for protection from something that might not happen. But ignoring the insurance needs of your business can have deep repercussions — and possibly destroy your ability to earn a living if something catastrophic occurs.

Think of your business insurance policies as well as your trusted insurance agent or broker as part of your strategic planning team. The right insurance ensures your business keeps running, serving your customers and achieving its goals, even when the worst happens.               

Small business insurance policies to consider

A business owner’s policy, also known as a BOP, fits the general needs of many small businesses, but it may not cover everything. Here are some of the insurance policies your business should consider, organized in order from mandatory to situational to optional. 

General liability insurance (aka commercial liability)

• What it does: It protects a business against a wide array of lawsuits stemming from negligence. The policy usually covers the cost of defense, claims for bodily harm or property damage, personal injury and advertising damages (libel or slander).
• Mandatory? A business won’t be able to rent space or secure a loan without general liability insurance.
• Costs: Will rise with greater exposure to risk. A business with delivery staff buzzing around the streets will rate a higher premium than a small publishing house.

Property insurance

• What it does: It protects a business against damage to its workspace, from a fire, leaks or any type of property damage event.
• Mandatory? Again, property owners, management companies and mortgagors won’t let businesses occupy a space without it.
• Costs: Location can have an impact on the cost. For example, businesses in low-lying areas close to bodies of water will incur greater costs.

Worker’s compensation insurance

• What it does: This insurance provides medical care and compensation when an employee gets hurt on the job. The employee usually accepts compensation in exchange for forfeiting the right to sue the employer.
• Mandatory? States govern the worker’s compensation rules, so requirements will vary depending on where you do business.
• Costs: State laws and programs impact the respective costs of workers’ comp. Also important is the type of business — whether it’s more likely to have claims — as well as a company’s claim history. If a company makes frequent claims, its premiums will rise.       

  Product liability insurance

  • What it does: Any company that makes, distributes or sells a product has exposure to product liability, because almost any product can cause some type of personal or property damage. This insurance helps protect against negligence, breach of warranty, product defects and faulty instructions. It also helps cover the costs of recalls.
  • Mandatory? It is not mandatory, but it’s often included in a business owner’s policy. Alternatively, businesses that provide parts/supplies to large companies might be required to maintain the insurance as part of the contract.
  • Costs: A maker of chainsaws will likely have far higher premiums than a pillow manufacturer.