Buying insurance for your small business can be confusing. What kinds of things do you need insurance for? When is it useful and necessary? If you aren’t a seasoned veteran of small business and don’t have experience in insurance, these questions are tough to answer. Luckily, we’ve got insurance experts all over the place at AP Intego, so let’s get you some useful answers.
What is insurance for?
Insurance is one of the major ways that businesses compensate for risk (the other major way being safety precautions). What’s the old saying...?
If something can go wrong, it will.
Every business owner tries their best to minimize what can go wrong, but they can’t cover everything. That’s where insurance comes in. When something does go wrong, the cost to your business is minimized with payments from your insurance company.
What risks does insurance cover?
Small business insurance covers two kinds of risks: damage and liability. Damage coverage is the obvious example. If you have commerical property insurance for example, when a branch flies through your shop window during a storm, the insurance company will cut you a check to pay for the repairs.
Liability coverage, on the other hand, is protection for lawsuits and their associated legal costs. If you have general liability, your insurance company will pay your legal fees and the associated medical bills when a customer slips on a wet floor and sues your business.
Certain types of insurance, such as workers’ compensation, have unique structures. Workers’ comp is a liability coverage that pays for the medical expenses of employees who are injured on the job, but also prevents those employees from suing the business in return.
Regardless of the details of specific insurance policies, when thinking about the necessary insurance for your business, it’s easiest to ask just three questions:
- What stuff would I want to protect from damage or loss? (e.g. buildings, inventory, cars and trucks, databases, etc.)
- What kinds of accidents or situations could someone sue my business over? (e.g. “slip-and-fall” cases, negligence, improper service, etc.)
- What is required by law? (e.g. workers’ compensation, etc.)
How does insurance differ from business to business?
Not all businesses have the same insurance, and not all the standard insurance policies cover the risks your business carries.
For example, a retail clothing store can probably get by with only general liability as far as liability coverage goes. There isn’t anything particularly dangerous for customers about clothes shopping compared to other business practices. But for a massage therapist practice, an additional type of liability, called professional liability or errors & omissions insurance, will be necessary. Since the therapist directly affects the customer’s body, there is a chance that they will do harm in the process of providing their service. This opens the door for a whole new category of potential lawsuits that can be very costly. So, the second kind of liability protection is needed.
If your business deals with food, private customer data, a physical service like hairdressing or home repair, if you have a lot of employees or high employee turnover, if you sell or serve alcohol, or if you need to protect your income should you be unable to work, then you should spend a good amount of time considering what insurances you need, because many of these kinds of risks are not covered in your standard general liability and property insurances.
That’s why getting expert advice is so important when it comes to small business insurance. The risk of missing something is just too high.