Running a small business is no easy task. You'll face a steady stream of competitors who want to snag your customers. You'll need to adapt to the changing tastes of consumers if you want to keep your sales strong. You'll constantly struggle with hiring the best employees.
But what if you overcome these hurdles only to watch as a customer slips and falls in your store and sues you for the resulting medical bills? What if a cybercriminal steals customer credit card information – a crime that could result in lawsuits from angry patrons? These incidents, and a host of other crises, could wipe out your savings and shut down your business.
This is why it's essential that small business owners invest in the right insurance protection. At a minimum, it must include general business liability and property insurance to protect you financially and help keep your business open.
But that is just the start. Depending on your business, you might need everything from a commercial auto insurance policy to business income insurance to an overall umbrella policy that will protect you from the most expensive lawsuits. If you're worried that your business isn't adequately protected, call your insurance agent. He or she can study your business and determine just how much insurance you need.
Here's a brief look at some of the coverage options small business owners might need to keep their doors open, should the unexpected happen.
Business general liability insurance
All small businesses must invest in general liability insurance. This policy covers any financial damages you suffer if someone is injured while visiting your business and sues you for the resulting medical treatment. It also protects you if your business's products or services injure customers or make them ill.
For instance, say you are using a ladder to stock cans of paint on a shelf at your business. If a can falls and injures a customer, and the customer sues you and wins, liability insurance would pay for the costs of any medical treatments that customer receives. Or, as another example, consider what might happen if a defect in a lawnmower that you sell sends a rock into the eye of a customer. If that customer sues you and wins, general liability insurance would cover the costs of the customers' medical expenses.
Worker's compensation insurance
Worker's compensation is another key type of insurance that your business absolutely needs. It protects your employees if they are injured while working for you, providing them with health benefits and payouts while they are unable to work.
Employees who receive worker's compensation give up their rights to sue you should they injure themselves while on the job. This provides important protection for your business.
Don't try to skip out on this insurance. Every state requires that business owners provide worker's compensation insurance for any W-2 employees. If you don't adhere to this regulation, you can face expensive penalties.
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Commercial property insurance
According to a recent report on insuranceQuotes.com, business owners can choose from a wide selection of property insurance policy options that meet their specific needs. Some policies cover a single peril such as a fire insurance policy; others cover a single cause of loss, such as a crime policy. Business property insurance covers the costs of any needed repairs if your property is damaged by a covered event, such as burst pipes, storms, fires, vandalism and theft. For instance, if a fire swept through your office and destroyed your computers, furniture and equipment, property insurance would pay for repair and replacement expenses. Or, if a heavy storm damaged your business's roof and required expensive repairs, your property insurance would pay for them.
Business interruption or loss of income insurance
If your small business's physical property is damaged severely enough, you might have to shut down for several weeks as you rebuild. Property insurance helps cover the costs of replacing damaged equipment and rebuilding your business space, but what about the income your business isn't generating because it is closed?
This is where business interruption insurance comes in. If your business is forced to temporarily shut down, it will provide some income while you rebuild your business's space. How much this policy pays out will vary depending on your policy, but it can serve as a financial safety net for business owners struggling with a temporary loss of income.
Commercial auto insurance
This type of insurance will pay out if the vehicles that your business owns are damaged or destroyed. Or, if your employees drive their own vehicles to deliver your business's products or food, you should invest in non-owned auto liability. This protects your business if your employees lack their own auto insurance or do not have enough coverage.
Errors and omissions insurance
If your business regularly provides advice to consumers – such as law office, accounting firm or tax-preparation service – you need to invest in errors and omissions insurance. This insurance protects you if customers who are unhappy with your advice decide to sue you.
For example, if a client follows your financial advice and runs into money problems, that client might sue you, blaming your advice for the problems. This insurance will cover your legal costs if you are sued and will cover the cost of judgments and settlements if you lose a lawsuit.
Data breaches are all too common and despite what you might read online, most of these breaches target small businesses, not giant corporations. Cyber liability insurance will protect your business if it suffers a data breach that results in lawsuits from angry customers.
Say you operate a dental office and a data breach exposes your patients' personal and financial information. Some of these patients might sue you. Cyber liability insurance will cover the costs of defending yourself against this type of lawsuit and will pay out if you lose the case. This insurance will also cover the costs of investigating the data breach and repairing any hacked computers or equipment.
Business owner's policy
Instead of purchasing separate policies, you can invest in a comprehensive business owner's policy that includes all these protections in one package. This might be an easier task than purchasing so many individual policies. Again, call your insurance provider to ask about these business insurance packages and get advice about whether they are appropriate for your small business.