Entrepreneurs give it all to get their company up and running. But sometimes, it takes just one lawsuit to put them out of business for good.
Data from The Hartford, an insurance company, reveals that the court costs for a general liability claim can exceed $75,000. And if you face a reputational harm lawsuit, you could face nearly $50,000 in costs, both of which are unviable costs for a small business.
Fortunately, there is a wide range of insurance coverage available to protect against all possible risks your small business may encounter. From lawsuits to cyberattacks to natural disasters, small business insurance can help keep your company secure, ensuring continuity and peace of mind in the face of unexpected challenges.
Here’s a roundup of critical small business insurance policies.
1. General liability insurance
Also known as business liability insurance, this insurance protects your small business from claims that result from normal business operations.
Who needs it? Any business.
What it does: Protects against financial loss due to injury, property damage, copyright infringement, reputational harm, lawsuits, advertising injuries, and medical expenses.
What’s covered? Legal representation and settlement costs.
2. Product liability insurance
This insurance cover shields your small business from the consequences of your company’s product not working correctly and any injuries or property damage it may cause to someone else.
Who needs it? Businesses engaged in manufacturing, wholesaling, distributing, and retailing products.
What it does: Safeguards against financial loss from a defective product that causes bodily harm or injury.
What’s covered? Medical costs, legal fees, compensatory damages, judgments, and settlements.
3. Errors and omissions insurance
Popularly known as professional liability insurance, this policy pays for costs resulting from mistakes you or your employees make. The types of errors covered include misrepresentation, negligence, breach of good faith and fair dealing, and giving false or inaccurate advice.
Who needs it? Any business that provides professional or advisory services.
What it does: Protects against financial loss due to malpractice, errors, and negligence.
What’s covered? Legal representation and settlement costs.
| Talk to us about how Escalon’s essential business services can help choose the right insurance coverage for your small business. |
4. Commercial property insurance
This policy protects the physical location of your small business and your business equipment, tools, supplies, computers, and office furniture. Owned and leased business equipment are also covered under this policy.
Who needs it? Businesses that possess substantial property and physical assets.
What it does: This policy shields your business from loss and damage to company property caused by lightning, fire, smoke, wind and hail storms, civil disobedience, and vandalism.
What’s covered? Repair or replacement of the damaged or lost business property.
5. Home-based business insurance
Suppose you’re operating your small business from home. In that case, this insurance policy ensures that your work equipment and inventory are protected in case of unexpected incidents.
Who needs it? Businesses run from the house.
What it does: Provides coverage for a limited amount of business equipment and offers liability protection for injuries involving third parties.
What’s covered? Payout for property damage, injuries related to the business, employee injuries, and lawsuits.
6. Business owner’s policy
This policy bundles the most common types of property and liability insurance your small business needs into a single, all-inclusive package at a competitive cost.
Who needs it? Most small business owners, especially home-based entrepreneurs.
What it does: Protects small businesses against property damage, business interruption, peril, and liability.
What’s covered? Lost income, work-related accidents, and litigation fees.
7. Cyber liability insurance
Also known as cybersecurity insurance, this policy covers your small business for risks associated with using computers and technology.
Who needs it? Businesses that store or process sensitive information.
What it does: Helps cover the cost of cyberattacks and data breaches.
What’s covered? Litigation fees, customer notification expenses, settlement costs, ransom payments, lost income, regulatory fines, and data recovery and identity recovery costs.
The final word
Small business insurance is vast, but its significance is undeniable. Your small business’s success depends on its ability to weather unexpected storms. By having the right insurance coverage, you’re not only safeguarding your venture but also ensuring its resilience and continued growth.
Take the time to assess your business’s unique needs and secure the protection that paves the way for lasting success.
Want to know more about startups and what it takes to get started? Since 2006, Escalon has helped thousands of startups get off the ground with our back-office solutions for accounting, bookkeeping, taxes, HR, payroll, insurance, and recruiting — and we can help yours, too. Talk to an expert today.
This material has been prepared for informational purposes only. Escalon and its affiliates are not providing tax, legal or accounting advice in this article. If you would like to engage with Escalon, please contact us here.
