Do I Need Business Insurance?

Insurance isn’t a fun purchase. In terms of your small business, it’s far more enjoyable to order business cards, design window decals, work on a marketing plan, and think about how to make your product the best you can. Some business owners push off business insurance because they can’t help asking: “Is this really necessary? Can I afford this extra expense for things that may or may not happen?”

The real question is: Can you afford not to insure your business? The commercial insurance company Insureon completed a study and discovered that only one in four businesses have adequate business insurance and 80% of businesses cannot recover after a disaster. With that in mind, business insurance is a small cost to pay to keep yourself safeguarded from financial ruin.

Do I Need Business Insurance?

The insurance industry is in the business of doom and gloom and disasters. They see your cute storefront located right in the middle of flood territory and say, “Hey, business owner. Let’s imagine that river floods and you can’t open your shop and you lose sixty percent of your inventory and now you can’t pay your employees and…”

And now you’re in the fetal position wondering if anything in life is worth the risk. Except, it doesn’t have to be like that. Unless you are a thrill-seeker who likes to live dangerously, eschewing all ethical responsibilities to others, consider business insurance part of the cost of doing business.

What Is Business Insurance?

Business insurance protects you and your assets from disasters, accidents, lawsuits, theft of property, data breaches, and even mundane hassles like clogged drains. Commercial insurance plans are tailored specifically to your industry and your specific risks. 

Many factors affect insurance costs, including business location, number of employees, and risky behavior. For example, if you run the ax-throwing brewery near my house (this is a real thing) and want to put sharp objects in the hands of people also drinking beer, get yourself some insurance, people! (I’m confident they are well-insured. And I am also confident I will visit.)

Are You Legally Required To Have Business Insurance?

If you are a sole proprietor of your business and don’t have any employees or customers (see ax-throwing reference above) to protect, business insurance might legally be optional. 

However, the rules are often state-specific, so it’s important to talk to a business lawyer or state insurance representative to make sure you are compliant with state requirements.

However, the government requires businesses with more than one employee to provide worker’s compensation, unemployment, and disability insurance. If you have employees driving business vehicles, you will also need commercial auto insurance, and some landlords and leaseholders require renter’s insurance or commercial property insurance as part of a rental agreement.

Another legal requirement might be business health insurance. If you have fifty or more employees six months or more out of the year, then you are legally required by the federal government to provide health insurance. If you aren’t required legally to provide health insurance and you do anyway, then you’re eligible for a tax break.