4 Things Small Business Owners Need to Know About Business Insurance

Owning a small business can be overwhelming, and business insurance might be the last thing on your mind. When you’re focusing on achieving sustainable growth, it’s easy to lose track of less exciting objectives like protecting your company.

To make things even more complicated, there are a number of types of business insurance that offer coverage for different things. This article will cover the most important kinds of business insurance and the protection they can offer small business owners.

1. Most businesses should consider general liability insurance.

General liability insurance is one of the most versatile and important forms of coverage for the majority of businesses. Companies in a wide range of industries can protect themselves with a comprehensive general liability insurance plan.

These policies are intended to cover your business in the event of damages. In contrast to commercial property insurance, which protects you from damage to your own property, general liability insurance provides coverage for lawsuits filed by a third party.

Common risks covered by general liability insurance

General liability insurance is designed to provide general protection for a variety of claims, so it applies to a variety of situations. Here are a few of the most common cases in which a general liability insurance policy could be helpful:

• Property damage and personal injury lawsuits
• Attorney fees and other costs associated with litigation
• Reputation harm claims by competing businesses

What general liability insurance doesn’t cover

On the other hand, you shouldn’t assume that a general liability insurance policy will give your business all the coverage it needs.

Like professional liability insurance coverage, general liability insurance isn’t applicable in cases of intentional acts. You also won’t be protected if an employee files a lawsuit or if you suffer damage yourself. Most businesses need at least two forms of insurance for sufficient protection.

2. You may want business interruption insurance as well.

Business interruption insurance works slightly differently compared to the other options on this list, and it can be even more important in certain situations. Like general liability insurance, it covers common risks that threaten most businesses.

These policies replace income lost as a result of unforeseen damage to your company. While most other kinds of business insurance protect you from specific, one-time costs, business interruption insurance pays you back for the money you lose when you’re forced to temporarily close your business.

What business interruption insurance covers

Your policy will cover costs in the event that your company is forced to close. This protection could include a number of different costs depending on the size and nature of your business.

The most obvious damage from closing your business is lost revenue. Business interruption insurance plans replace that income based on typical earnings. You’ll also be compensated for lease, rent, loan payments, relocation costs, taxes, and more.

Make sure you can prove your losses.

Business interruption insurance only covers you for the losses you can prove, so it’s important to document this information thoroughly and store it in a safe place. This is especially important for small and growing companies whose income and costs can change drastically in just a few months. Check your policy’s fine print for more information about the required documentation.

You might never need to file a claim for your business, but it’s impossible to predict when something will go wrong. Business insurance can be surprisingly complicated, so it’s important to understand the different types of insurance and what they cover. These are just a few of the most important types of insurance for small business owners.

3. If you give professional advice, look into professional liability insurance.

Professional liability insurance is one of the most common types of business insurance, and it’s easy to see why. It protects you and your company in the event that you provide a defective service or flawed piece of advice that leads to financial damages for one of your clients.

Also known as errors and omissions insurance, professional liability insurance is an important source of protection for a wide range of small businesses. Lawsuits can drain critical resources and make it much harder for a company to grow. Attorney fees alone can run anywhere from roughly $150 to $325 per hour.

With professional liability insurance, you’ll know that your business will be protected from all litigation costs if something goes wrong. This coverage is also surprisingly affordable, making it a smart investment for companies of all sizes.

What professional liability insurance doesn’t cover

On the other hand, you should keep in mind that no individual type of insurance coverage is enough for most small businesses. If you only have professional liability insurance, you could be vulnerable to several other types of loss.

As the name “errors and omissions” implies, your policy will only protect you from accidents and mistakes. Intentional damages including fraud probably won’t be covered.

Furthermore, this kind of insurance is usually intended only for financial losses rather than physical damage or injury. These are more likely to be covered by general liability insurance (more on that later).

4. Has your business invested in expensive equipment?  A commercial property insurance policy would be wise.

While professional liability insurance is generally best for service-oriented businesses, commercial property insurance is intended for companies with highly valuable assets or equipment.

Commercial property insurance covers your company in the event of physical damage from things like weather events, thefts, and fires. If any of these pose a threat to your business, commercial property insurance could be a good investment.

Premiums are determined based on your level of risk and total asset value. Discuss your situation with a commercial property insurance provider to find the policy that’s right for you.

What does commercial property insurance cover?

Businesses acquire commercial property insurance for a number of reasons. These are some of the most common assets protected by this type of coverage:

• Office equipment like furniture, phones, and computers (both leased and owned)
• Inventory
• Documents and records
• Your building

Final Thoughts

Many companies use commercial property insurance along with other types of coverage to protect themselves from a wide range of risk. Keep in mind that your policy won’t cover you for professional errors, physical injury, or other common issues.