Comprehensive review of small business insurance
Running a small business can be stressful. As a business owner, you oversee everything from sales, customer relationships, expenses, employees, equipment…etc. With so much to do and so little time, you shouldn’t have to worry about “what ifs” and hypotheticals. However, accidents do happen, and you can lose a lot of money if you’re not protected.
That’s where small business insurance comes in. By purchasing small business insurance, you can avoid the anxiety of worrying about potential conflicts with customers, equipment damage, or employee injuries. In case you don’t know where to start, this article will review the most common forms of insurance for small businesses.
General Liability
General Liability Insurance protects your business from third-party claims of property damage and bodily injury. Suppose a customer slips and injures themselves in your store or one of your employees accidentally damages your customer’s property. In that case, General Liability Insurance will cover the customer’s medical bills and costs related to replacing the damaged property, respectively.
General Liability Insurance can also include protection for damages caused by your products or advertising. Say you put up a poster that unintentionally misleads customers about a sale you’re having or accidentally sell a defective product. If customers are unhappy and decide to take legal action, your General Liability Insurance will cover the cost of their attorney fees and any settlements or judgments against your business, up to your policy limit.
Most small businesses need General Liability Insurance, regardless of their industry or size. If you have customers coming in and out of your place of business, or if you interact with them and their property in any way, it’s a good idea to have this type of insurance.
Commercial Property
Commercial Property Insurance (also known as Hazard Insurance), covers the physical property associated with your business, including buildings, equipment, inventory, and furniture. Payout amounts depend on the method used to value your property; replacement cost, actual cash value, or fair market value.
Actual cash value is the present day value of your property, which is equal to the original value of your property minus any depreciation (a decrease in the value of your property due to age or use). Replacement cost is the amount needed to replace your property based on the cost of similar items. Fair market value is what your property would be worth if it went on the market today.
If you own the building your business operates out of, you’ll need Commercial Property Insurance to protect your investment from weather events, fires, theft, or vandalism. If you’re renting, you may still need Commercial Property Insurance to protect the equipment and inventory inside of it. For example, if a pipe bursts and flooding damages some of your merchandise, your landlord’s insurance policy won’t cover the cost to replace it - but your Commercial Property Insurance will.
Commercial Property Insurance can also include business interruption coverage, which means the insurance provider helps replace your lost income when property damage forces you to stop operating the business.
Business Owner’s Policy (BOP)
Business Owner’s Policy (BOP) combines Commercial Property and General Liability Insurance into one policy. Purchasing a BOP results in a lower cost for business owners than buying property insurance and general liability policies separately.
Workers’ Compensation
Workers' Compensation Insurance provides benefits to employees who are injured or become ill as a result of their job. Benefits typically include medical expenses and income replacement. For example, if an employee gets carpal tunnel or chronic back pain from years of typing and sitting in front of the computer, Worker’s Compensation Insurance can cover rehabilitation costs and replace the worker’s income while they take time off.
In some cases, workers’ compensation includes survivor benefits. That means if an employee dies because of a work-related injury, the employee’s family gets financial support to compensate for lost income.Typically, funeral expenses are also covered.
Most states require Workers’ Compensation Insurance for companies with employees, including small businesses. Some states exempt employers with only a few employees from mandatory coverage laws. Nevertheless, since most personal health insurance plans don’t cover work-related injuries, most business owners purchase a workers’ compensation plan to protect themselves from financial distress and potential employee lawsuits. (Check out this article for more information).
Commercial Auto
Commercial Auto Insurance covers damages (from collisions, weather events, theft...etc) to any vehicle you drive for business purposes. It can also cover the costs of medical treatment for you or your passengers if you get into an accident.
If you or your employees use a vehicle for business purposes - even if it’s to make the occasional delivery or run the occasional errand - you should get Commercial Auto Insurance. That’s because personal auto insurance policies typically exclude coverage for damages caused by business activities. So if you get into an accident while making a delivery, your personal auto insurance policy probably won’t cover the cost of repairs or the medical bills of anyone injured in the accident.
Professional Liability
Professional Liability Insurance protects your business and your employees whenever you are sued for negligence in the course of providing professional services. This type of insurance will cover the cost of defending yourself in court, as well as any costs associated with the settlement or legal judgment.
Each business's risks are unique, so the coverage is tailored to your profession. For example, an IT/technology consultant would most likely need software copyright infringement coverage, whereas a fitness instructor needs protection in case a client gets injured while training.
Professional Liability Insurance is essential for any business dealing with clients who may not understand the service they’re getting. If it’s possible for a client to misinterpret your advice, you’ll need Professional Liability Insurance to protect you - even if you haven’t made a mistake.
Employment Practices
Employment Practices Insurance protects businesses from lawsuits alleging wrongful termination, discrimination, and other employment-related claims, such as wage and hour violations. For example, employees may file wage and hour lawsuits accusing employers of wrongfully depriving them of overtime pay or proper classification as salaried workers. This type of insurance can help cover the cost of legal fees, settlements, and judgments associated with those lawsuits.
Sometimes, coverage for employment-related claims is included in the General Liability policy. Business owners should check their General Liability coverage ahead of time or consider purchasing Employment Practices Insurance separately.
Data Breach
Data Breach Insurance helps small businesses respond to situations where sensitive personal information (about the business, employees, or customers) gets compromised. Data breaches are often caused by hacks and software viruses, but they can also happen through human error. For example, your employee could mistakenly send a file with sensitive information to the wrong email address.
A typical data breach for small businesses with a storefront is point of sale system hacks, where customer credit card information gets stolen. While this type of insurance can't stop data breaches from happening, it can help you deal with the consequences by paying for reputational damages and notifying the impacted parties.
Conclusion
If you’re not sure what kind of insurance you need or aren’t satisfied with your premiums, please reach out to info@withhansa.com. We can answer any questions you have in more detail and make a personalized recommendation. We’ll make sure you’re getting the best rates on the market!