Yes, Insurance is Boring, and Yes, We Have to Talk About It

Nothing makes an entrepreneur start yawning faster than talking about business insurance.

And insurance premiums? They can seem like such a waste of money. That’s good money that you could be investing in your business. You already have to pay for workers’ compensation, unemployment, and maybe even disability insurance for your employees. (And don’t get me started on health insurance!)

Insuring your business can also be complicated. Unlike traditional home or auto insurance, you can’t just call a 1-800 number and buy a one-size-fits-all policy that covers the myriad of things that can happen (well maybe you can, but I wouldn’t recommend it.) No, it takes time, concentration — and possibly a whole series of conversations with your agent — to get the insurance matter settled.

Business insurance is such a hassle that you may be tempted to take your chances and go without it.

But you need to have insurance for your business.

I am not an business insurance expert — just an experienced small business owner. I’m here to tell you that bad things can happen, even to good businesses, and you’ll be glad you had coverage when mishaps occur. Your best employee causes a major accident in your work vehicle. Someone slips and falls in your store. A customer decides they don’t like the way you built their new house. Or, an employee will unintentionally blow up a laundromat (yes, in my case, that really happened, and my insurance covered the whole amount.) Insurance can help protect your business and your family from all kinds of trouble.

Notice I say “help protect.” Having a business insurance policy is not a fail-safe. That’s why you need to understand exactly what you’re getting — and not getting — with your policy. For that, you need someone to help you comprehend it all — an agent or a broker.

Not all brokers and agents are created equal. You want to do business with someone who will not rush you, but actually take time to understand your business and point out your areas of vulnerability. For example, If you own a home-based business, your homeowner’s insurance may not cover business losses. If you’re manufacturing a product, you may require different insurance than if you’re running a hair salon or a consulting business.

With all those caveats said, here is a general overview of the basic insurance you may want to help protect your business:

Commercial general liability offers protection from many different kinds of claims, including accidents, injury, and negligence. This type of insurance may help you pay to defend yourself in case of a lawsuit. (I will say that all business owners should have this kind of policy.)

Product liability insurance may protect you from safety issues in connection with a product you are manufacturing, selling, or distributing. If someone becomes injured because of a product defect, product liability insurance may offer you some protection.

Commercial property insurance offers coverage for your business property from storms, fire, and smoke, vandalism, and crime. Business property can mean anything from physical business assets (buildings, equipment, tools, inventory, etc.) to lost documents and files. This insurance also may help you recoup losses from a business interruption, such as an extended power outage.

Commercial auto insurance is meant to protect you from accidents involving vehicles used in your business, including physical damage and bodily injury. Note: this insurance is required of business owners in certain states.

Professional liability insurance, also known as Error & Omissions (E&O)  insurance, may protect your business from malpractice, errors, or negligence in delivering services.

Employment practices liability (EPLI) insurance may protect you if a current or a past employee sues you for a whole host of reasons, such as wrongful termination, harassment, etc.

Directors & officers (D & O) insurance may cover the legal defense of your company officers or directors in the case of claims that they harmed the company.

Cyber-liability insurance may offer you protection if sensitive data is stolen or compromised. or from a business interruption that involves your computer or files.

Other insurance to consider:

Life insurance. This insurance can provide cash to your family members and/or your business partner in the event of your death.

Homeowner’s insurance: While this insurance is not meant to cover your business, you may be able to add a rider to your policy that will cover some aspects of your business.

Personal umbrella insurance: This is a catch-all policy that may protect you in some aspects in which you do not have coverage.

When you own a business, bad things can happen. Don’t procrastinate — make sure your business is properly insured. You never know when your employee will accidentally blow up a laundromat!

If you’re looking for information, check out my article: 15 Types of Small Business Insurance? Which Do You Need?


About the author

Mike Kappel is the president of Patriot Software, Inc., which develops affordable online software for U.S. small business owners. As a serial entrepreneur, he has successfully started five small businesses and shares advice for other entrepreneurs in his blog, the Small Business Expert. Connect with him on Twitter @MikeKappel and Google+


















Photo credit: David Hilowitz


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