Small Business Insurance: Managing Risk

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A business owner needs to be prepared in the event of a disaster. When accidents, injuries, negligence, theft, or other losses occur in a professional situation, the business and their owners can often be held liable for these losses.

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What does it mean to be liable? Liability is a legal responsibility to settle financial debts or obligations to those affected by a loss, typically in the form of a lawsuit, which can total amounts greater than the business is able to afford. Business insurance exists to help pay for these liabilities. Business Insurance doesn’t prevent disasters from happening; rather, it is a proactive solution that protects you from liabilities once a disaster has occurred. Insurance prevents the cost of business mistakes from leading to complete financial ruin.

This video will cover the primary types of business insurance to help you protect your assets and your business, as well as list some of the more specialized policies available. We will also share some agent resources to help you secure the perfect insurance policy for your small business.

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Protecting Your Company from Liability

The term “Business insurance” isn’t actually a specific type of insurance policy; rather, it is a term used to describe the types of insurance coverages designed for business owners and their companies. The specific policies and levels of coverage required will depend on the size and type of business you operate. You don’t need to know all the details—a qualified agent will help determine where your liabilities lie and recommend appropriate policies—but every business owner should have a basic understanding of what coverages are available.

 

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Insurance is a standard cost of doing business and is relatively inexpensive compared to the potential impact of a lawsuit. Considering that the cost of a single claim can decimate a company, it’s the smart thing to do. Let’s take a look at three of the most common forms of small business insurance:

The first is GENERAL LIABILITY INSURANCE. General liability insurance is the most common type of business insurance, as it covers the most basic needs that are shared among all types of companies. Things like bodily injury on your business’s property and physical damage caused by employees are covered by this policy. If you aren’t sure which types of insurance your company needs, you should look here first. Bear in mind, General Liability does not cover employee injury—which brings us to the next common type of business insurance: WORKERS’ COMPENSATION INSURANCE.

Workers’ compensation insurance (workers, or workmans, comp for short) is meant to protect the interests of your employees if they are injured on the job. It can also protect your business from a lawsuit if that employee needs additional compensation for their injuries. If you have any employees, you’ll likely need this coverage; almost all states have laws requiring Workers Compensation Insurance.

Thirdly, there is PROFESSIONAL LIABILITY INSURANCE. Also known as Errors and Omissions insurance, Professional Liability Insurance is a policy that is meant to protect professionals in the workplace. Expert advice given to a client by you or your employees may not always lead to the desired result. If your guidance is deemed inaccurate, negligent, or fails to deliver agreed-upon results, it can leave you open to liabilities if the client is financially damaged and blames your company. Professional Liability Insurance is essential protection for providers of professional or expert advice: Real Estate and Insurance agents, financial advisors, and other coaches and consultants can all benefit from this type of insurance.

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Aside from these foundational types of insurance coverages, there are also more specific policies available. They are typically specialized to match the unique needs of different businesses. Some of these include:

• Commercial auto and property insurance, which are similar to personal auto and homeowner’s insurance, but for professional vehicles and workplaces. These policies protect owners against damages arising from car accidents, fire, certain natural disasters, and so on.
• Business Interruption Insurance compensates your business a percentage of lost revenue in the case of a catastrophe and business shutdown.
• Product Liability Insurance covers physical or other harm to a customer that is caused by a product that you manufacture or sell.
• Home-Based Business Insurance covers gaps in your homeowner’s insurance policy if you run a business out of your home.
• Data Breach Insurance covers some of the damages in the event that your customers’ digital data is breached or stolen.

To simplify administration and save money, you can consolidate your coverages with a Business Owner’s Policy, also known as a BOP. A Business Owner’s Policy is a group of insurance policies tailor-made for small businesses. These packages typically include general liability, commercial property, and business interruption insurance and can be customized to your business’s specific needs.

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In conclusion, your business needs insurance. This fairly modest investment will protect both your business and personal assets from the inevitable liabilities that arise from mistakes and disasters. Now that you have seen the basic types of business insurance policies, you can learn more about each one in detail at our website. Check out the links in the description below for over 300 business ideas with detailed insurance breakdowns of what policies and coverage you will need. We also provide recommended agent links to speak directly with a specialist to help you get the best rate on the policies your business needs.

We are dedicated to providing the most useful information for small business owners and would love to see your feedback in the comments on what other information you need to help follow your entrepreneurial dreams. Visit us at HowtostartanLLC.com.