When you began your journey to start your small business, you probably had a dream. You pictured yourself in your cozy store selling your products, or you imagined doing taxes or fixing clients’ computers from the comfort of your well-appointed home office. You had conversations, wrote plans, tested prototypes and perhaps took out loans. Then, just when you thought you had all your ducks in a row, you realized that you also needed to purchase insurance for your small business. With the same dogged determination that you employed to accomplish your other goals, you examined your various insurance options and eventually settled on the plan that seemed to best suit your needs. Now, before you breathe a sigh of relief and move on to other priorities, we recommend that you take another look at your insurance coverage. You might be surprised by what you learn.
Businesses come in all shapes and sizes, and some present more risks to be insured against than do others. Did you know that it is possible – and even desirable – to find a policy that fits your particular business needs? For instance, let’s say you have a computer repair business. As an IT specialist, you need information technology coverage, an errors and omissions policy that protects you if you are sued for giving advice that is alleged to have caused injury or financial damage. You also want someone to have your back if you are accused of making a mistake on a repair.
Don’t forget about workers’ compensation coverage. For much of the country, it is mandatory for any company that has employees. It protects you against being sued for negligence in the event of workplace accidents or illnesses and pays for workers’ medical bills and lost wages while they are recovering. How much you’ll pay depends on how many employees you have, their tax classifications and the type of work they are doing.
Third-party employee dishonesty insurance protects you against worker dishonesty or fraud that results in loss or financial damage to you or your business. The cost of this coverage will depend on the type and sensitivity of the information or tasks you and your workers handle.
When you buy some insurance policies, you get automatic access to the company’s lawyers. In the event that a lawsuit is brought against you, this benefit can come in handy, saving you hours of searching for the best legal assistance from an attorney who understands the ins and outs of representing your particular kind of company.
Insurance Provides Credibility and Legitimacy
Drawing and signing contracts with your clients can be a daunting process. One thing you may not have expected is that your client can, and often will, demand your certificates of liability insurance documents. These prove to your client that you have coverage, furnishing them the details they will need to feel secure in signing up to receive your services.
Policies Can Be Bundled
If this is your first time navigating the world of business insurance, you might be under the mistaken impression that you always need to buy separate policies to cover differing needs. That is not true. In fact, small businesses can bundle their property and liability coverage into what is known as a Business Owner’s Policy or BOP. These policies offer the advantage of giving you all your coverage in one convenient, and usually more cost-effective package.
You’re Covered Even if a Lawsuit is Frivolous
Peruse your local news or look at the top stories online and it won’t be long before you see an example of a crazy lawsuit that makes you shake your head in a combination of wonder and frustration. As a small business owner, frivolous litigation such as this could turn into a real nightmare. Fortunately, your errors and omissions policy, often called professional liability insurance, protects you even in the event of a ridiculous or unsubstantiated suit. No matter what merit the litigation has or does not have, your insurance will cover the cost of your legal defense. That certainly takes a load off your shoulders, doesn’t it?
Data Breaches are Covered
Errors and omissions insurance doesn’t just cover lawsuits; it will also protect you against hacking and other data breaches if your business is IT-related. This is true even if the hack caused your client to sustain expensive damages.
Protection Against the Consequences of Crimes
Let’s say one of your employees commits a crime that causes harm to a client, or you or an employee make an unintentional mistake that results in financial loss. Although general liability and errors and omissions packages typically do not come through in situations such as this, you can still protect yourself by purchasing fidelity bond coverage. In fact, this type of insurance is actually required for some types of businesses that regularly work with banks and other financial institutions that are concerned about theft.
Homeowners Coverage Isn’t Enough
If you’re just starting out, you might fall prey to a misconception that has snagged many a fledgling entrepreneur; the incorrect idea that your homeowners insurance will be sufficient coverage as long as you do business from a home-based office. In reality, your home coverage will not protect you if, for instance, a deliveryman sustains an injury while bringing a work-related product to your door. Furthermore, your auto insurance might not come to your aid if you are in an accident while doing business. At the very least, you need to look into adding riders to your existing homeowners policy. More likely, you will also need to purchase general liability insurance.
The road to entrepreneurship is long and bumpy. You probably never imagined that there would be so many unexpected challenges or pleasant surprises. Although insurance can fall into both categories at one point or another, the fact is that taking the time to obtain comprehensive coverage that addresses all of your business needs will pay for itself time and time again. Insurance is one of those aspects of life that you hope you will never need but which, at the same time, can provide peace of mind from just knowing that it’s there.