Do You Need Insurance for Your Business?
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The term business insurance encompasses the many different types of insurance available to protect businesses, business owners, and employees of businesses. As a new business owner it can be stressful to think about the additional costs involved in getting your business up and running. However, every business owner should have some basic type of business insurance. Obtaining insurance for your business is an investment that will help protect your business and your livelihood.
Types of Business Insurance
Most types of business insurance are optional and some are only recommended for certain types of businesses. However, while not required by law, a property and casualty insurance policy is highly recommended for all business owners. Further, your landlord may require you to carry property insurance. Property and casualty insurance generally come bundled together and protect both the physical property where the business is located, as well as the interior of the business. This means that the equipment, the product, electronics, and anything else of value inside your place of business will be protected in the event of an emergency.
Before you decide on a policy, be sure to review it to find out which types of emergencies it covers. For example, if you are in a high-risk area for hurricanes and your property and casualty insurance only covers you in case of fire damage, you should seek out a policy that fits the needs of your area. The most desirable property and casualty insurance policies have “all risk” coverage, which provide protection in a wide variety of unexpected disasters.
General liability insurance is also highly recommended for business owners, even those who have limited liability through their business entity. While the owners of an LLC or a corporation may feel protected by the statutory limited liability that comes with their business structure, it is important to remember that this liability protection is not absolute. This is especially true for smaller businesses, whose owners have a harder time when they are sued because they are seen as the face of the business and have a high level of involvement in the operation of the business. General liability insurance can help protect your business and personal assets from being taken in a judgment against you.
If you own a sole proprietorship or partnership, you should always carry general liability insurance. It is also highly recommended that you obtain an umbrella liability policy as well. An umbrella liability policy works as a fill-in-the-gap policy, as it protects your business from areas in which your other policies will not. It is especially important to carry an umbrella liability policy when your business involves high-risk services or products, like food-service or pharmaceuticals. Businesses that deal in the sale of products should also consider obtaining product liability insurance.
Business Insurance and the Law
There are times when you are required by law to have insurance for your business. For example, if you are planning to hire employees, you are generally required to obtain workers compensation insurance. Workers compensation protects your employees if they injure themselves in the course of their employment. Workers compensation also protects the employer, as many workers compensation statutes do not allow the employee to sue their employer for most injuries incurred at work. Unemployment insurance is also required if you have employees. Another type of business insurance that is required by law is vehicle insurance. If you have company vehicles, or vehicles that are primarily used for your business, these need to be insured under a commercial auto insurance policy. It is important to remember that your personal automobile insurance policy will not cover automobiles used primarily for your business.
Other Types of Business Insurance
There are many other types of policies that can protect your business such as life insurance, disability insurance, and business interruption insurance. As is true with any business decision, the types and amount of insurance you obtain should fit within your business budget. While it is best to protect your business from as many risks as you can, you must be realistic about the amount you can afford to spend on insurance each year.
When assessing your basic and additional insurance needs consider the risks involved in the type of business you plan to establish, as well as risks that are prevalent to the region, such as natural disasters. Next, you should discuss your options and your budgets constraints with a business insurance agent. Your insurance agent can help customize a package that will fit the needs of your business and give you adequate protection, without breaking the bank.