Business Insurance for the Small Business

    August 23, 2005

If you’re still in the planning stages of starting a new business, you’ve probably enumerated all your expenses and laid out all your needs in a business plan. In the excitement of actually getting your business up and running, it’s too easy to plan for the best and forget to prepare for the worst. A little insurance can go a long way to help your business over crises and rough spots.

At a bare minimum, the Small Business Administration recommends that your business carry at least the following types of insurance:

Most Important Of All: Property Insurance Property insurance is like homeowners’ insurance for your business. It will insure the physical assets of your business against loss in the event of catastrophic events like fire. The SBA recommends that you check your policy carefully to be certain that the most likely events that will cause damage are covered. In many states, for instance, it’s common to exclude floods from standard property insurance. You’ll need a specific rider to cover that.

If your business owns vehicles, or uses a vehicle for transporting or delivering goods or services, you also should have business auto insurance. If you use a personal vehicle (or employ others who do) that vehicle should be covered under a business rider in addition to the regular auto insurance that is required by your state. If it is involved in an accident while being used for business purposes, your personal auto insurance coverage may not cover the damages.

Special Coverage for Equipment or Liabilities If your business depends on specialized equipment, including computers, you should insure them under separate coverage. In many cases, your property insurance for the business will only have limited coverage for technical equipment.

Insure Against Financial Loss Business income insurance will reimburse you if an unexpected catastrophe like a fire causes you to close your doors temporarily. Based on estimated earnings for that period, it can help you pay your bills and expenses even while you are unable to do business normally. If your business is a seasonal one, you might consider peak season coverage in case a fire or accident causes you to close your doors during your busiest time of the year.

Many insurance companies offer package policies for small business owners that combine all needed insurance under one umbrella – a Business Owners’ Policy. Usually, the premium on a business owners’ policy will be substantially less than you’d pay if you purchased each coverage separately. Your insurance agent can help you tailor a plan that takes all your business needs into account. He can even add specialty coverage to a standard umbrella policy at a discount if you combine everything into one plan.

Besides insurance that protects your company and its assets in case of damage, most states also require that you carry workers’ compensation coverage if you employ others on your premises, or to carry out tasks for your business as an employee. Again, an insurance agent can help you decide whether you need to carry workers’ compensation for your employees, but in general, unless those that work for you are specifically employed as independent contractors or consultants, they are considered your employees and you are responsible for providing coverage for them.

You should also check your state’s laws regarding health insurance, not only for your workers but for yourself. Each state has different laws regulating what insurance must be provided for what size business, but in some states, it works to your benefit if you are a self employed owner of a business with one employee – yourself. In Maine and several other states, certain insurance plans must be offered to you at group rates even if you are the ONLY employee of your business.

If your business has unique needs, you should consult an insurance agent who is experienced in writing policies for other businesses that share your field. Businesses such as barber shops, restaurants and professional offices all have unique needs that require specialized knowledge of the protections that might be required in that field.

Gannon Pierpont is the staff writer of
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