Reasons You Should Have Business Insurance

Business owners might wonder why they should invest in protecting their business and assets. Here are some important reasons to consider as you weigh your insurance needs:

It Fulfills A Legal Requirement

If you have more than one employee, you need to provide worker’s compensation, disability, and unemployment insurance. Also, your landlord may legally require you to hold renter’s insurance. (These requirements are state-specific, so check your state’s legal requirements.) 

People Like To Sue Other People

Humans are litigious and sue-happy. No matter what business you start, there is the potential for someone, at some point, to become unhappy with the business or your product and engage you in a lawsuit. Handling a lawsuit without liability insurance could be disastrous to any small business — even if the business is eventually found not liable. (And, yup, if you aren’t fully covered, the plaintiff could come after your personal assets.) A lawsuit is costly and stressful. And insurance is more affordable than you might think — a sole proprietor of a business who wants one million dollars in liability coverage could pay as little as $30 a month for peace of mind.

Protects Your Business In The Event Of A Disaster

The word disaster in this scenario could be anything from an Act of God, a fire, theft or vandalism, or anything else that has the potential to stop your business from running smoothly or running altogether. A business owner’s policy that provides a package of general liability and commercial property insurance will protect from the most common disasters.

Protects The Humans You Employ

Insurance isn’t just doom and gloom. Offering insurance protection to your employees creates a positive work environment and sends the message that you care about the people working for you. While you may have to provide basic protections like worker’s compensation, disability, and unemployment, you can also offer health insurance (and if you aren’t legally required to provide it, you can receive a tax break for doing so) and life insurance policies to help attract and retain quality workers.

Provides Tax Breaks

Business insurance is a tax write-off and you can claim your premiums as deductions. (Except, funny tip: if you are a beneficiary for one of your employee’s life insurance policies, you can’t deduct that insurance policy…so, since tax laws become oddly specific, it’s important to check with a tax expert for your state.)

Contracts May Require Proof Of Insurance

If you want to borrow money for your business, the bank may require you to prove your business is insured. Also, if you work with clients or other businesses as independent contractors, they may also require proof of insurance before choosing to work with you. 

Insurance doesn’t just provide peace of mind for the business owner but also for the people who engage in the business.

What Type Of Business Insurance Do You Need?

Okay, you’ve made the wise choice to insure your business. Now you’ll need to research which policies are the best fit for your business model. Businesses in riskier industries will need more group health insurance, but there are options for all types of business owners, from sole proprietors to corporations. The most basic types of insurance types are:

• General Liability Insurance: General liability protects your business in the event of a disaster, lawsuit, or accident. Claims against a business can arrive in the form of bodily injury, property damage, personal injury to a customer (including slander or libel), or false advertisement.
• Commercial Property Insurance: A commercial policy insures your building, business products inside your building, and other people’s property while it’s in your care. Property damage due to theft also falls into this category.
• Professional Liability Insurance: Also referred to as E&O insurance, this is additional liability insurance that helps cover your business from professional liability of either errors (where your business caused a financial loss for a client) or omissions (an employee didn’t do his/her job as required).
• Worker’s Compensation Insurance: If an employee is injured at work, this will protect your employee and you if a lawsuit should arise. Worker’s compensation is a requirement for businesses with more than one employee.
• Commercial Auto Insurance: If your business involves a fleet of vehicles or if an automobile is needed, you will want to cover those vehicles under a commercial insurance plan.
• Business Owner’s Policy: This is a policy offered by most insurance companies; it includes both general liability and commercial property protection.
• Renter’s Insurance: This might be a requirement if you are renting/leasing business space. This protects your location from damage and liabilities for that damage.
• Business Interruption Insurance: If something stops your business from functioning (a flood, an Act of God, or an illness or other accident), this insurance will help pay for lost income incurred during the interruption. This insurance specifically covers income and profits and covering the cost of getting your business back up and running.