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September 1, 2022
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The day a business owner sets up a company, they expose themselves to a number of risks. It could take only one lawsuit to knock a small business out of business — for instance, in the event of a lawsuit, a general liability claim can average more than $75,000 per case to defend and settle, according to data from the Hartford. It is essential for entrepreneurs to ensure they have the right insurance for all types of business risks, so as to not leave themselves exposed and vulnerable.
Thankfully, a wide range of insurance coverages are available to cover all the possible risks a business may encounter. Check out this breakdown of some insurance policies that an organization should have in place, even if they may not need them all right up front. Note: amount of coverage and cost of policies vary among different insurers.
This is typically the first insurance policy any new company should get, because it covers your assets in case of a claim against you. For example, you will be covered by general liability insurance if someone slips and falls at your business.
This type of insurance can be tailored based on your business’ specific needs. And even though you probably will not find an out-of-the-box solution that covers everything, you will want to get this policy shortly after setting up your company so the policy will pay for potential damages.
In order to make sure that you and your staff members are just as well protected as your customers and clients are, a workers’ compensation policy is required. This insurance policy covers injuries incurred by you or your team members while on the job.
In most U.S. states, a workers’ compensation insurance policy is compulsory if you employ a minimum number of people as W-2 staff members (therefore, it may not be optional if you fall under this category). For instance, in California, you must have a workers’ compensation policy, even if you only have one employee. Therefore, check out your state’s requirements and obtain coverage accordingly.
Just like the workers’ compensation policy, unemployment insurance is generally required by your state if you have staff members. This type of insurance ensures that those staff members can continue to earn money even if they lose their jobs. It is best to set up this coverage when you first enroll employees in your payroll process.
Property insurance allows you to be reimbursed if your place of business experiences damages or losses. For example, if a fire broke out in your office, this insurance policy would likely cover both the building itself and the items in it, including furniture, computers and inventory.
An insurance company may offer you business owner’s packages in which you can purchase a number of business insurance policies at once, and this policy is known as a business owner’s policy (BOP). These packages can be customized, and usually cover general liability insurance, commercial property insurance and business income insurance at the same time. According to the Insurance Information Institute, typically, businesses with 100 employees or fewer and revenues of up to about $5 million or less are ideal candidates for a BOP.
Most businesses keep private customer information on file, ranging from credit card data and Social Security details to perhaps even health records, depending on the type of business. In order to ensure that you are protected against network breaches, you must consider a cyber liability policy. This policy will allow you to defend yourself in case of a breach of privacy, and help you pay for your defense and/or any damages incurred if you are found guilty.
In case of damages due to instances such as fire in your building, your property insurance may cover you for stuff like your computers and inventory. However, it is likely you will need business interruption insurance to reimburse you for the losses you face from not being able to conduct business while you are awaiting a new batch of inventory. A business interruption insurance policy will essentially help you replace income you lose during times of interruption.
Not every firm has a company car, but if yours does, then a commercial auto insurance policy can come in handy. This insurance policy will reimburse you if your work vehicle is damaged or if someone is hurt in the vehicle during the course of business.
In some cases, a general liability policy may not cover you if a product you sell malfunctions or breaks down and causes harm to a customer. If you create, distribute and/or sell such products, you should consider adding product liability insurance to protect yourself.
If you are running a business out of your home, you need to consider getting a rider on your homeowner’s insurance policy to protect yourself. A home-based business insurance policy can take care of instances of injuries that someone might face after visiting your place of work (home) to do business, or in some cases, it may even help you recover the cost of losing business equipment.
If you’re considering these types of business insurance policies, it is a good idea to speak with a professional who can assess your liability risk and help you choose the best coverage for your company. Accountants, insurance agents, attorneys, and professional organizations can all be good resources as you navigate the insurance process.
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