7 Essential Types of Insurance for Small Business Owners
Whether starting your own small business or growing the one you have, it’s important to understand your insurance needs and have the best policies to protect yourself and grow the business. NetQuote breaks down the types of business insurance available and why you may need it.
Let’s get started:
1. General Liability
Liability insurance (also known as Commercial General Business Liability) policies protect businesses against financial responsibility for property damages or bodily injuries caused by you, your employees, or your products and/or services. A must-have according to the U.S. Small Business Administration (SBA), it is broken down into three types of business liability:
General liability coverage protects you against lawsuits resulting from accidents, injuries or claims of negligence.
Product liability coverage protects manufacturers and/or vendors of products against product defect claims. It also protects against damage or injury caused by your product.
Professional liability coverage protects against errors or negligence, such as malpractice insurance for attorneys and physicians.
2. Commercial Auto Insurance
Commercial auto insurance protects your business vehicles. Similar to a personal auto policy, commercial auto policies provide financial protection against personal injury and other liability as well as coverage for collisions and uninsured motorists.
Business owners should purchase commercial auto insurance because personal auto policies will not provide coverage for employees driving for work purposes and/or transporting products or equipment. The risk of financial loss due to accidents and lawsuits is reason enough to purchase this type of insurance.
3. Property Insurance
Property insurance protects your business against certain unforeseen incidents that jeopardize business assets and real estate. Incidents can include disasters such as fires and storms or crimes such as vandalism and theft. Property insurance policies cover buildings (the physical location of your business) and personal business property such as equipment and supplies your business owns.
Policies come in two forms: 1) all-risk which covers mostly all incidents and 2) peril-specific which specifies certain incidents. As with commercial auto insurance, potentially hefty financial losses related to these incidents can result in the loss of your business.
4. Workers’ Compensation
Workers’ compensation provides coverage for your employees if they get injured on the job. It can also offset employee medical and rehabilitation costs (and some lost wages). While it is mandated by law for most states, it also benefits you as a business owner.
For example, your employees forego their right to sue your business for negligence thereby reducing your exposure to legal complications.
5. Life Insurance
Life insurance policies protect an individual against death. The business pays a premium in exchange for a payment of benefits to the beneficiary of an employee who dies. Life insurance can help protect your business against the loss of a valuable employee whose death directly impacts your business operations.
It also provides peace of mind to loved ones who might be financially impacted by the unexpected loss of a family member.
6. Health Insurance
Unlike businesses with more than 50 full-time equivalent employees, businesses with fewer than 50 full-time equivalent employees are not mandated by law to provide health insurance. In addition, there is no penalty for not providing health insurance.
However, if you are a business owner that employs less than 50 full-time equivalent employees, there is a value in providing health coverage. Some of the benefits to offering health insurance to your employees include:
- According to MetLife 12th Annual US Employee survey, employees who are satisfied with their benefits are more than twice as likely to report being very satisfied with their jobs
- Employers can deduct 100% of their employees’ health insurance cost as a business expense
- Small businesses with fewer than 25 employees can receive a tax credit if certain criteria are met
- Because many health plans emphasize preventative care and improving health through wellness awareness, business owners reap the rewards of healthier employees who are more productive according to studies.
Help is available for small business owners to find affordable, flexible and convenient coverage.
7. Business Owner’s Policy (BOP)
Business owner’s policies (BOP) combine protection from major property and liability risks into one package. BOPs take into consideration a common denominator of risk to which businesses are exposed and package them together.
Typically, BOPs include property insurance, business interruption insurance, liability protection, medical payments, loss of income, data breach, equipment breakdown, and employment practices liability.
However, BOPs do not cover professional liability, auto insurance, worker’s compensation, health and disability insurance. BOPs save small business owners time and energy in trying to figure out exactly what coverage to purchase.