The majority of small business owners fail to properly insure their businesses. Not only do they fail to properly insure them, but in many cases, they fail to have any insurance at all. One of the biggest risks that a small business owner can take is not insuring their business.
So why do so many businesses not have insurance? Cost is the primary reason. Many business owners think that opening an insurance policy will detract from their revenue. Luckily though, the cost of business insurance is relatively affordable (depending on which industry your business operates in).
There are several different types of business insurance though, so how do you figure out which one your business needs? Or does your business require several different coverage types? These are the types of questions that you should be asking yourself before beginning your search for an insurance provider.
To help you narrow your search down (as well as assist you in determining exactly which type of business insurance you need), we’ve created an outline of the various business insurance types. We also go into detail regarding why it’s foolish to operate a business without insurance.
Why You Should Never Operate Without Insurance
If you’ve been operating a business for even the smallest amount of time, you should know by now that you need to expect the unexpected. This is why it’s so surprising that there are so many small businesses operating without any form of insurance at all.
Not only is operating a small business (without insurance) most likely illegal in your municipality, but it also puts your business at risk for numerous types of lawsuits. General liability insurance is one of the most common insurance types found in the business world, and yet there are still countless small businesses that fail to have even this basic level of protection.
How would your company be able to handle a lawsuit? What about four lawsuits coming from three different employees and a customer? Do you have the liquidity to settle them? What about the cost of legal fees, court, etc.?
Most companies simply cannot handle the financial fallout from lawsuits, which is why having business insurance is absolutely essential (especially in the US, where “lawsuit culture” is the norm).
Most Common Forms of Business Insurance
Nearly every single business in existence has some type of legal risk inherent to its operation. This is why business insurance is so vitally important to the overall success of your company.
Not having insurance is leaving both yourself and your company open to financial ruin. Below is a brief overview of the main types of business insurance you can purchase in the US.
Commercial property insurance is one of the most important types of insurance that a business can have (particularly if they operate out of a brick-and-mortar location or are involved in retail).
Vehicle insurance for businesses protects your company vehicles from costs incurred due to damage from accidents. If your business has a fleet of company cars/trucks, having a commercial vehicle policy is required.
One of the very best ways of minimizing the risk associated with your business is by having a general liability plan. As its name implies, general liability insurance plans cover a wide range of potential mishaps/accidents.
Specific coverage types vary from company to company (and also depend on the needs of your specific business). If your business ever caused damage to a third-party’s property, general liability insurance will help pay for your legal fees (as well as any costs associated with the damage).
Business Owner’s Policy
If your business wants to save time, money, and energy, it should consider investing in a BOP (business owner’s policy). This type of insurance policy basically combines several different policies into one comprehensive package (which makes policy management much, much easier to deal with).
If any of your employees face the risk of getting injured while working for your business, one of the most important types of insurance that could have is workers’ compensation. Not having workers’ compensation opens your company up to lawsuits and other legal actions.
Knowing that your business is covered from paying the costs of an employee’s illness or work-related injury can provide an immediate and profound sense of relief. Most businesses don’t have the financial means to pay for every single employee’s workplace injuries/illnesses (which is where workers’ compensation fills the gap quite nicely).