Everybody knows you should take internet advice with a grain of salt. But sometimes it’s hard to distinguish the facts from reasonable-sounding fictions. Even in your personal life, you might just accept advice from people who you trust without double-checking.
When it comes to insurance, you really should double-check. It only takes five minutes, and it just might save you thousands of dollars. So without further ado, here are the most common pieces of bad advice about small business insurance.
Bad advice: If you run a home business, you don’t really need insurance
Let’s say you knit custom hats and sweaters and sell them online and at local flea markets. If a thunderstorm causes a tree branch to crash through the roof of your garage and ruin several boxes of inventory, your homeowner's insurance will only cover the cost of repairing your roof and removing the tree limb. You’ll need to have a business property policy to safeguard any business inventory or equipment you keep in your home.
Bad advice: Business insurance is pretty much one-size-fits-all
A pizza shop and a beauty salon may both be in the service industry, but that’s pretty much where the similarities stop as far as insurance is concerned. Property coverage for things like ovens and freezers is meaningfully different than coverage for curling irons and salon chairs. Beyond that, businesses that serve food will need insurance for spoilage and contamination, whereas a salon may need professional liability in case someone sues over a bad haircut.
Bad advice: General Liability covers accidental employee injuries
This one is common among new business owners. General liability actually protects your business from lawsuits by customers and visitors. This usually includes “slip-and-fall” incidents and such. If you have employees, nearly every state in the US requires that you have a Workers’ Compensation policy, which is the insurance that protects you and your workers in case an employee is injured on the job.
Bad advice: Insurance is basically the same everywhere you go
Remember how we said Workers’ Compensation is required in nearly every state? Well, in Texas, it isn’t required. In New Jersey, Workers’ Comp is required, and the state determines the rates for all types of employees (so you get essentially the same price no matter where in NJ you go). Meanwhile in North Dakota, Workers’ Comp is run entirely through a single state fund, so there is no shopping around at all. And those laws are just for Workers’ Comp!
To avoid breaking any laws, you’ll want expert guidance when insuring your business. Only speak with licensed and reputable insurance agents, brokers, and companies.
Bad advice: You can’t be found liable for the actions of contractors you hire
As nice as it would be to avoid blame where it isn’t due, business owners can be sued over the actions of contractors they hire to work on their business location. Obviously, hiring only well-reviewed and professional contractors is key, but you can’t be too safe. It only takes a few minutes to make sure the General Liability or Business Owners’ Policy you are looking to purchase contains coverage for contractors on site.
Bad advice: If you’re an online business, you definitely don’t need insurance
You’ve built up enough of a customer base to move from eBay to a personal business website. Have you considered who is responsible for keeping your customers’ credit card data, mailing address, and so on? If you store that information, you’ll need a Cyber liability policy to prevent a piece of malware from costing you thousands in lawsuits.