Running a small business is all about risks and optimism. Small businesses generally lack smooth credit flow, constant innovation, smart business management, which are important to ensure their survival. Adding to that, increased competition from large corporations in today’s globalized world is making it difficult for them to survive and sustain. Today, more than ever, they are prone to risks and closures.
A comprehensive package of insurance essential for all businesses as it ensures protection and security. It can be a powerful tool in financial security for a small business. The main purpose of insurance is to cover a risk that a small business cannot afford (at the cost of small premiums, which they can afford easily). They can save hundreds, sometimes even thousands of dollars if their owners spend some time to look at some small auxiliary things like insurance policies.
Types of insurance coverage:
Although, insurance needs vary widely from one business to another, here are some important policies that a business owner would want to consider in order to protect his/her business.
Business property insurance
Business property insurance is a broad form of coverage that protects a small business from a wide variety of losses including damage to building that houses business, tables, desks, chairs, equipment etc. due to natural disasters such as earthquakes or floods. A well-structured all risk policy can cover all the equipment (both software and hardware), valuable records and even loss of income.
There can be many things that a small business can lose and that too in seconds. None of the small business owners running a restaurant, lodging, retail outlet, etc. will ever forget the destruction caused by 2009 Great Britain and Ireland floods. Many small business owners learnt that in a blink of an eye, everything of their business can get destroyed.
Liability insurance is an important form of coverage in today’s litigation-looped world. Typically, there are four types of liability insurance, which include:
General liability insurance: It is the most common form of liability insurance. This type of insurance covers damage to property or injuries suffered by third party (customers, vendors or visitors) as a result of negligence of the employees.
Somebody, be it a customer or a vendor could trip and fall due to torn or folded carpet and suffer a serious injury. The person may need a surgery which might cost the business owners some hundreds or thousands of dollars. It may not be a major issue for a large business, but for a small business, arranging huge amounts on the spot may risk the normal functioning of the business.
Errors and omissions insurance: Also called as professional liability insurance, errors and omissions insurance is essential for service based businesses. It protects professionals from personal claims against them for causing harm while performing their duties. Professionals, who require high degree of standards or care such as doctors, financial advisors, attorneys, accountants, engineering consultants, realtors, dentists and others, require this type of insurance.
Product liability insurance: This type of insurance is very important for small businesses involved in manufacturing. It protects the business if an item manufactured is responsible for harming (accident, injury, or death) the user.
Employment practices liability insurance: Sometimes dissatisfied employees bring inappropriate claims asserting discrimination (age, sex, race, disability, etc.), sexual harassment, wrongful termination and other employment-related issues. Employment practices liability insurance provides protection to a small business against these claims made by employees, former employees and even potential employees.
Excess liability insurance, also known as Umbrella liability insurance, provides additional coverage beyond that of an underlying policy. It provides coverage for medical costs or other claim payments that can exceed the amount of liability insurance.
Generally, employer is responsible for the injuries that occur to employees at work, so he/she should take care of the employees. Even a small business employing just one person should have a workers compensation insurance coverage. It provides coverage for medical expenses and reimburses the lost wages when employees get injured at work.
Business income insurance
Business income insurance is disability coverage for small businesses. Business interruption ensures that all the employees get paid when the business cannot operate temporarily as a result of a covered loss. It also covers business operation expenses and profits that would have been earned until the business get back to its pre-loss state.
Automobile insurance is compulsory for a small business if it uses automobiles such as cars or trucks. It provides coverage for damage or theft and also covers third party bodily injury or property damage claims.
Life insurance is important for small businesses which have two or more owners. In the event of the death of a business partner, the life insurance policy funds the buy-sell agreement.
There are some other types of insurance policies, which can assist small business owners such as health insurance for employees, certificate of insurance to the landlord (for rented or leased office spaces) to ensure that the business will not be closed overnight.
The list of insurance policies mentioned above may look hefty, but it is not necessary for a small business to have all of them. As a smart business owner, one has to approach one of the frontline insurance brokerage houses to evaluate the requirements and prepare a comprehensive insurance policy that best suits his/her business.