Entrepreneurs may be natural risk takers, but there are some things no business can afford to leave to chance. Comprehensive insurance coverage may seem like an unnecessary drain on tight resources, but it’s an absolute essential if you want your company to survive a serious incident. Which types of policy should small business owners consider taking out?
Public Liability
If a customer or a member of the public is injured in an accident on your premises, or otherwise comes to physical harm because of your business, then you could be liable for damages. Even if you’re not at fault, the costs involved in defending an action can be crippling. Public liability insurance will cover you for this.
Product Liability
Product liability insurance is often included in public liability policies, but it pays to make sure. This insurance covers the costs of being sued over injuries caused by defective or badly designed products that your business makes, repairs, or supplies.
Professional Liability
If your company provides services or advice and you’re effectively selling your expertise, then taking out professional liability insurance is prudent. If professional errors on your part cause material or financial damage to a client, there’s a good chance they could sue. This insurance will cover your legal costs and even damages, so long as you were acting in good faith.
Workers’ Compensation
However, it’s not only the public and clients to whom you have a duty of care. If you employ staff, you also need to be covered for any accident or injury they suffer at work – whether you’re at fault or not. Workers’ compensation insurance will cover wage replacement and medical benefits in these cases.
Having this type of coverage is a legal requirement in most jurisdictions, although the exact qualification details vary. Crucially, workers included in this coverage automatically waive the right to take further legal action against their employers after an incident.
Property Insurance
Whether you own your premises or rent them, you need property insurance. This will cover your building, equipment, and inventory in case of fire, storm, flood, or other disaster. If you work from home, your ordinary home insurance will likely not cover costs relating to your business, and so you need to make specific provisions.
Business Interruption Insurance
While property insurance can be invaluable in a disaster, it will only cover the costs of damage and physical loss. Business interruption insurance takes this one step further, and compensates you for lost revenue while you recover. This can keep you in business by letting you continue paying staff wages, supplier contracts, and other expenses while your income is affected.
Auto Insurance
Business auto insurance covers accidents, damage, and loss involving your company’s vehicles. Delivery vehicles and company-owned cars are covered, and most policies will also cover employees driving their own vehicles on company business. This last option provides valuable extra coverage for your employees, but also protects your business from third party claims after an incident.
Business Owner’s Policy
Lastly, many insurers offer a policy package including whichever of these types of insurance your business needs. Taking out a combined business owner’s policy can work out to be less expensive than buying individual products, and it also makes administration easier. However, make sure that the policy fully covers your needs, while at the same time not including expensive coverage you don’t require. Sometimes, putting together a bespoke package with the help of an insurance professional is the simpler and more cost-effective option.
Most small businesses run on tight budgets, and some types of insurance may seem a waste of resources that could be directed elsewhere. However, if you find yourself needing to make a claim, having the right coverage in place could be the difference between your business going under or living to trade another day.
