10 Types of Business Insurance for Small Business
Venturing into business is exciting, but there’s more to do to ensure your business is safe from lawsuits, damages, or cost claims.
Insurance policies protect your company from unexpected risks that can arise during normal business operations. There are several insurance options business owners can choose from to keep their companies safe.
The insurance policies you choose vary depending on your business venture. For instance, an LLC needs a more substantial protection plan than a sole proprietorship. However, all businesses have unique needs, and various insurance policies exist for each, depending on the owner’s objectives.
Somehow, insurance policies for businesses are akin to the insurance taken out by individuals for different purposes. There are life insurance policies, car insurance policies, home insurance policies, health insurance policies, and umbrella coverage for all needs. So, why shouldn't you guard your business on the same level as yourself?
This post will discuss the different types of business insurance for small business entrepreneurs to consider.
Types of Insurance Policies for Small Businesses
Depending on the kind of business you’re running, the insurance policy you select will depend on the unique challenges and risks your business faces. Here’s a list of 10 types of insurance for small businesses.
1. General Liability Insurance
General Liability Insurance (GLI) is a comprehensive policy that protects a business from specific claims. The policy cushions your business from financial losses due to third-party claims. Third-party claims include property, bodily, and personal and advertising injuries. GLI extends beyond your business location to the client's.
But what does a GLI cover in a small business? Think of a situation where an employee damages an outdoor sculpture while landscaping. Another scenario is when a customer slips on a wet floor and breaks their arm. What happens? General liability insurance will cover repair costs, medical costs, and legal fees if the need arises. Generally, GLI covers these critical areas in a small business:
- Bodily injury - when someone is injured on your business premises, GLI covers ambulance fees, medical expenses, and lost wages for the victim.
- Property damage - if your employees damage another person’s property, GLI will cover repairs or replacements.
- Libel and slander—If your business is accused of harming another person’s reputation, GLI will cover legal costs and settlements.
- Copyright infringement - using copyrighted material without authorisation from the owner can cause legal issues. Thus, GLI will meet the legal defence costs and settlements.
2. Commercial Property Insurance
It’s essential to protect the business property you own or lease to ensure all assets are safe, and this is where property insurance comes in. The policy is also known as small business hazard insurance and is suitable for covering the contents of a structure from damage and theft. Protected properties in your business premises include:
- Building or unit
- Furniture
- Equipment and tools
- Personal items
- Product Inventory
Commercial insurance also shields the property from environmental damage like lightning strikes that damage your building by repairing or replacing the structure.
3. Workers' Compensation Insurance
Workers' compensation insurance is a way to compensate employees when they get hurt. The compensation includes:
- Settle their medical bills
- Pay the wages they lose when they miss work due to the injury they sustained
- Cover funeral expenses if a worker loses their life from a work-related injury or illness
- Meet the cost of ongoing care like physical therapy or counselling
As soon as you become an employer, you are legally required to get workers' compensation insurance. Without team member liability insurance, your business can face financial penalties or criminal charges for not complying with the law.
4. Business Interruption Insurance
Business interruption is mostly included in general liability insurance. The policy covers profits lost when a business is interrupted by specific events. For instance, when your business premises are partially destroyed, and some inventory is in it, business interruption insurance can restore the profits you would have made from the inventory.
It’s important to note that business interruption insurance differs from property insurance in that the latter only covers the physical damage to a building. As for interruption insurance, the policy only covers profits lost due to the damage.
5. Data Breach Insurance
In this digital era, data breach insurance helps your business react to a data breach if sensitive information is lost or stolen. Some insurers term it as coverage cyber insurance, and it can help you cover these costs:
- Notify affected individuals
- Provide identity theft monitoring services
- Organise a public relations campaign
Every business needs a website to help a brand adopt the electronic Point of Sale system (POS). Cyber liability insurance will benefit you if you’re using other types of technology in your small business. The policy covers small businesses by protecting them against tech-related risks like:
- Data breaches
- Cyber extortion
- Malware attacks
- Hardware failure
Hopefully, you don’t ignore cyber liability insurance, thinking only large companies need it because you’re a startup. As long as you’re operating online, your business is at the risk of data breach.
6. Commercial Auto Insurance
Any business that provides workers with company cars needs commercial auto insurance. The policy protects employees on the road from bearing any liability in case of an accident when driving company-owned vehicles for business.
Commercial auto insurance can help cover bodily injury claims or property damage from an accident your business is responsible for. It’s important because a personal car insurance policy doesn’t have third-party claims for you when driving a business-owned vehicle.
7. Public Liability Insurance
If a customer slips in your commercial building, breaks their iPhone or injures their arm, your business will be liable for the damages and injury. You can reduce this risk by getting Public Liability Insurance (PLI) to help you cover these costs.
In a nutshell, PLI will cover property damage costs, legal expenses incurred, and bodily harm. The policy also covers the same liabilities as Business Liability Insurance. However, the main difference is that BLI covers injuries sustained by the public while PLI covers property damage. As a result, PLI is more affordable and helps a company maintain a good reputation in taking care of the public.
8. Product Liability Insurance
If you’re selling a physical product (s), you must consider product liability insurance because there's a risk level associated with using any product. For instance, a client can suffocate when fitting a shirt or a nutrition product, which can cause allergies to the user. In this scenario, your business can face a lawsuit. However, with product liability insurance, your business is protected as the policy will cover all costs to make everything right.
Companies selling services need Professional Liability Insurance to protect them from potential lawsuits against their services. It applies to engineers, consultants, attorneys, accountants, and architects.
The insurance, also known as errors and omissions (E&O) insurance, guards your business from expenses associated with negligence in their professional service. Your business will be protected if the damage is alleged or actual. Still, in some instances, your company may have to show proof of professional liability insurance for clients to sign contracts.
9. Crime and Fidelity Insurance
You’ll notice that not everyone is honest when working with different people. Some people may have sticky fingers, something you may have no control over. You may discover that some of your employees have zero integrity, which means you may lose money, products, or customers. However, if you have a Crime and Fidelity Insurance cover, the policy can help you cover losses from:
- Employee theft
- Credit card forgery
- Computer fraud
- Destruction of property
Are you feeling surprised or confused? DON’T. Any employer is prone to dishonest employees; and there’s no formula for pinpointing them. Thus, you need a cover that can protect you and your business from such characters.
10. Health Insurance
You can increase employee motivation by providing health insurance for better productivity and job satisfaction. It’s alarming when small business employees keep missing work due to sickness because they can’t afford proper treatment. However, when you provide them with a Health Insurance policy, they’ll get the appropriate medication and return to work quickly. Fortunately, securing small business health insurance for a few employees is easy and affordable.
Frequently Asked Questionss
What insurance policy is a must for my small business?
General and professional liability insurance is the most ideal insurance cover for small businesses. Getting the right insurance for your business is crucial as it protects your building and company from losses or lawsuits that may arise in the course of business.
What type of insurance is most profitable?
Life insurance is the most profitable insurance business yet the hardest to sell. It has the longest-running contract and highest premiums, bringing in cash for a long time. Once a contract is signed, the first year earns agents the highest annual sum on a policy, which lies between 40% and 120% of the policy premium.
Can I sell different types of insurance?
Through the point-of-sales person (POSP) model, you can sell multiple insurance policies from different insurance companies. Unlike agents, POSP advisors are flexible and can provide valuable policies from different insurance companies depending on customer needs.
What is the title of the person working for an insurance company?
An insurance agent sells insurance policies. The job is ideal for anyone who loves to work with people, meet new contacts, and talk a lot. Thus, selling insurance policies will be a walk in the park for such a person, and you don’t need a college degree for the job.
Can you withdraw money from a life insurance policy?
You can withdraw money from a life insurance policy without being taxed or take out a loan. However, these withdrawals will reduce the death benefit your dependents will get from the policy.
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In Summary
Picking the right insurance policy for your small business isn’t about finding an excellent solution in one cover. Instead, you must combine multiple policies to get customised protection for you and your business.
The size of a business in any industry isn’t the determinant of its need for insurance coverage; its needs and objectives determine it. It may seem like only established companies need insurance policies, but even a small business needs insurance once it opens its doors and starts trading.
You may wonder why you have to spend money on insurance premiums, yet you’re only beginning. Well, when dealing with different people, employees, and customers, anything is possible. Someone might get injured in your business, your services might not provide needed solutions, or your employee can damage a customer's property, not to mention dishonest employees.
With such a handful, some incidents may be expensive to settle, especially if lawsuits come your way. As your business grows, you must also change to include necessary insurance policies over time. Do you have any questions on business insurance for your small business? Kindly contact one of our experts here.