Covering All Bases: The Types of Insurance Every Small Business Owner Needs to Have

When you are getting started with a new business, there are a thousand and one balls to get into the air, and it is important to prioritize the jobs if you are not to be submerged. It’s easy to think that insurance can wait until tomorrow, but remember that disaster can strike in seconds and, if you don’t have the right insurance in place, you may not recover.

There are two main areas for which a business needs insurance: compensation for losses and protection for legal liabilities.

Cover Your Losses

An obvious type of compensation relates to property belonging to the business. If you own premises or machinery, you will need to take out appropriate insurance for the things that can go wrong, including fire, theft, and accidental damage. If you use vehicles as part of the business, you will need commercial use cover.

There are other things, which may not be so obvious, that you will need to consider. For instance, if a piece of machinery is stolen, you will not only face the cost of replacement but you may also lose income while it is out of action. For this, you will need business interruption insurance.

What happens if a key member of staff dies or is seriously ill? It may well take time to restructure things and the business can lose money during that period. In this case, a form of business life insurance can see you through.

Face Your Liabilities

You will probably want to start with General Business Liability Insurance. Typically, this will cover you against actions brought against your business by anyone who might suffer damage or loss as a result of your actions or those of your employees. It will also cover your legal costs if the case comes to trial, as well as any damages that may be awarded.

If you employ staff, you will need Worker’s Compensation Insurance, in case any of your employees is injured or made ill as a result of their work. This is a legal requirement, although the details vary from state to state.

Professional Liability Insurance (or malpractice insurance) is necessary if you are offering professional services. This is different from general liability, and any business which provides services that require professional qualifications or adherence to a code of practice should definitely take this cover. A related area might be where your business retains private information about customers or workers; data breach insurance covers you against failure adequately to protect that information.

Choosing Your Cover

In theory, you can insure your business against anything, but that would not be a good use of your resources. You need to sit down and think hard about what could go wrong, how likely those events are to happen, and what the consequences could be. Draw up a list of the areas of cover that you think you need, and then search for an insurance company or broker who seems to understand your line of business and ask for their advice.

As an example, suppose that you are starting out as a personal trainer. If you use your car to travel between customers with equipment, you will want your car insurance to cover commercial use. If you purchase expensive machines you will want to cover yourself against loss and accidental damage, and if you rent premises you may be required to take out insurance against damage or rent defaults. You might be considered at a higher than average risk of injuring yourself, so you could consider insurance against a resulting loss of income.

Your liabilities would be different from those in many businesses, as there is a risk of people suffering injuries while under your supervision. If you are offering your services in a gym, there may be uncertainty as to who is legally liable. So you should look for a firm that understands the requirements of liability insurance for personal trainers and can talk through the specific risks that you face. You will also keep records of your clients with confidential data about their health, and you will probably need data breach cover for that.

Right Cover, Right Insurer

Very often, getting the right cover is a matter of finding an insurer who understands the nature of your business. It may cost a little more than getting generic insurance from a household name, but the peace of mind that can come from knowing your cover is relevant and secure is worth the extra.

Image: MaiaLisa

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