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Jessie Eby contributed to this blog.
There is no shortage of tasks to juggle when you’re a small business owner. From crafting your business plan to thinking about marketing strategies, you’re probably doing a lot of things for the first time. But there's one crucial aspect that often gets overlooked in the hustle and bustle of entrepreneurship: insurance. In this article, we'll explore the importance of insurance for small business owners like you and cover the different types of insurance, selecting the right plan, and getting the coverage you need.
Does my business need insurance?
In short, yes. General liability and coverage on your assets (equipment, property, etc.) are required if you’re taking out a loan, but you should have insurance even if you’re entirely self-funded. Insurance is a safety net that can protect your small business from the unexpected. Accidents, lawsuits, and disasters can happen anywhere, and being adequately insured can save you from crippling financial losses by covering the costs of repair, legal fees, and more.
And it may be required for you to work with certain clients or partners. In the state of Nebraska, all small businesses with one or more employees are required to have workers’ compensation, unemployment insurance, and on some occasions, disability insurance.
Why insurance matters for small businesses
Insurance can protect your small business from unexpected disasters. Here's why it's so important:
- Financial protection: Accidents, lawsuits, and disasters can happen to any business. Insurance can help you avoid crippling financial losses by covering repair costs, legal fees, and more.
- Peace of mind: Knowing you have insurance can help reduce stress. You can focus on growing your business, knowing you have coverage in the event of an incident.
- Credibility: Some clients and partners may require you to have insurance before they work with you. It adds a level of professionalism and trustworthiness to your business.
Without adequate insurance, your lender may take out a policy on your behalf, at your expense. This policy serves to protect the lender's interest in your business—that is, your outstanding loan balance. This policy only protects your lender, leaving you and your asset at risk.
What kind of insurance do you need?
Different businesses have different insurance requirements. The type of insurance your business needs depends on the type of business you own and the way your customers interact with it. Do your customers experience your business in person on your business property? Do they work with you online? Does your business use an automobile? Here are a few of the different types of insurance:
- General liability
- A must-have for most businesses, general liability insurance covers damage, accidents, or injuries that occur on your business premises or as a result of your operations.
- Commercial property
- Commercial property insurance protects your business property, including equipment, inventory, and the building itself from damage due to fire, theft, or other covered dangers.
- Business income
- Life keeps moving, even in the wake of disaster. In the event of an accident or business-interrupting event, business income insurance can help replace lost income. This coverage can help you keep up with ongoing expenses such as rent, payroll, or utilities.
- Professional liability
- Also known as errors and omissions insurance, professional liability insurance will protect your business from lawsuits if you make a mistake in the services you provide.
- Data breach
- You are responsible for protecting the personal information your customers share with your business through their patronage. Data breach insurance helps your business respond to a breach if personal information is lost or stolen.
- Commercial auto
- If your business uses one or more vehicles, you’ll need commercial auto insurance, which covers property damage and bodily injury claims from accidents caused by your business vehicles.
- Workers’ compensation
- Workers’ compensation covers employees in case of accidental injury on the job and is a requirement for all employers. This type of coverage can help cover medical costs, pay for ongoing care, and replace lost wages. Learn more about managing employees on our blog.
Depending upon the insurance agency you choose, you may be able to bundle various coverages into one product. An experienced insurance agent will be able to help you select the appropriate insurance for your small business and make sure you’ve got the coverage you need.
What about property?
If you lease your business property, you don’t have any insurable interest in the building, but you need to insure the contents of the building such as your inventory, tools, etc. If you own a building and have business tenants, you need to have coverage to replace the building in the case of an accident, and to be able to cover an alternative business location for your tenants to use temporarily.
How to get insurance for your small business
Shopping around can save you some money in the long run. It’s a good idea to begin your search with your auto and home insurance agent. He or she can recommend the types of coverage your business needs, and you may be eligible for certain discounts or deals by staying with the same company. You shouldn’t stop there, though. Shop around for quotes so you can compare pricing and coverage. Don’t overlook independent insurance agents; they often have a greater variety of quotes at reasonable prices.
Insurance is an investment in your business's future. It might seem like an added expense now, but it can save you from financial disaster down the road. Taking the time to explore your options and make informed choices now can protect your small business from life's unexpected curveballs. Your business and your peace of mind will thank you for it.
