Small Business Basics: Insurance

Katie Fleming

Katie Fleming

Co-founder and COO of Owner Actions

A life preserver floats in water, representing the importance of the protection afforded through small business insurance

Have you thought about the types of insurance you’ll need to protect your small business? If your business is like many others, you may need policies to protect your employees, site, and customers’ critical data.

Your insurance needs will depend on a number of factors. These include whether you work from home or offsite, whether you store personal customer data, and whether you employ others in addition to yourself. But here's something to keep in mind. Many find they need some or all of the types of insurance we cover in this article. However, you should speak with a commercial insurance agent who can advise you on your specific needs.

 

What are some of the policies I might need?

Commercial general liability (CGL)

CGL is a must for small business owners. It can protect you from “claims that occur through the ordinary course of business operations.” These might include property damage, injury, and claims of stolen ideas, invasions of privacy, slander, or copyright infringement against you or your employees.

When to purchase it: Before you create products or begin work

 

Errors & omissions (E&O)

E&O  is sometimes called professional liability insurance. It can help if you're sued for inadequate work, negligence, or advice you give clients that results in financial loss.

When to purchase it: Before you begin advise, consult, or offer support to your clients

 

Medical malpractice

Medical, health, and wellness pros must have this insurance to guard against claims of negligence, cover legal costs, and access an allowance to rebuild their reputation.

When to purchase it: Before you meet with clients or offer verbal, written, or electronic advice

 

Workers' compensation

Workers’ comp can cover the costs relating to on-the-job injuries. Often, these costs include lost wages, medical expenses, and rehabilitation.

Every state has workers’ comp laws. Most require every state-registered employer to hold this form of insurance.

When to purchase it: When you hire your first employee

 

Property

Commercial property insurance helps you recover costs related to disaster, theft, and vandalism at your site. Often, coverage includes the repair or replacement values for the land, landscape, structures, and also the contents of buildings located on the insured site.

This insurance isn't just for people who own buildings or land. You'll also need it if you have a commercial lease. Here, coverage may be limited to the contents of your leased unit.

When to purchase it: When you buy a property or sign a commercial lease

 

Commercial auto

Does your business own or lease vehicles? If so, you'll need a commercial auto insurance policy. It's also a must when you have employees who use their own vehicles for job tasks. These might include transporting goods, team members, or customers. Some carriers also offer a form of rideshare or on-demand insurance that can provide the right forms of coverage.

When to purchase it: When you buy or lease a vehicle or plan to use a personal vehicle for business purposes

 

Employment practices liability insurance (EPLI)

EPLI is important. It protects against employment claims of discrimination, harassment, defamation, misrepresentation, or invasion of privacy. You can also buy extended coverages to protect against third-party complaints.

When to purchase it: When you begin building your team

 

Cyber (data breach) liability

This form of insurance can protect your business in three ways. First, it can help you guard against claims of inadequate protection of sensitive, personal, or private data. Second, it can protect your business through computer-related attacks, which may include phishing, malware, and ransomware. And third, it offers coverage when physical pieces of technology that can access confidential information are stolen.

When to purchase it: When you build database systems, set up software, store private information, or use email or other platforms for your business

 

Directors and officers (D&O)

D&O protects the assets of a business’s directors and officers and their spouses through claims of actual or alleged wrongdoings. What might this look like? Often, it's a breach of contract, breach of fiduciary duty, misuse of funds, fraud, theft of intellectual property, poaching customers, mismanagement, or a failure to comply with laws.

When to purchase it: Most often, it’s needed when you appoint others to represent or speak on behalf of your business

 

Key person

This form of insurance serves as a life insurance policy for people whose death would cause financial or reputational hardship for the business. Often, the business pays for the policy and serves as the beneficiary.

When to purchase it: When the death of a person would have detrimental effects on the long-term health of the business

The specific policies and coverages you choose will depend on your business’s unique needs. Need help working through them? Talk with a commercial insurance agent who can help you assess your needs and find policies that will protect your business.

Would you like to check out some online insurance firms? Take a look at these three options:

 

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