When starting a new company, even small business owners should consider investing in insurance coverage to cover their risks. However, this can be a daunting task because of the many choices and wide range of options. Making informed decisions is key. An integral part of that process is performing due diligence by researching insurance coverage that is available in the marketplace. Even if you run your small business out of your house, your inventory stock and equipment is subject to losses in the event of a fire, flood, or other disaster. Very likely, your homeowner’s policy will not cover those losses because they are outside the purview of personal property.
1. Assess your company’s risks and determine what types and amounts of coverage you will need. Depending on your company’s needs, this might include as separate or package policies:
liability. If a customer is injured while on your company’s premises, you may be vulnerable to a civil personal injury action. Sufficient coverage can help protect you in the event that an injury accident occurs.
- Health coverage for employees. This becomes more of an issue for companies with more than a few employees.
- Workers compensation insurance for employees. Not every company is required to carry workers compensation, but generally speaking, if the business has more than a few employees they will need to get coverage.
- Vehicle coverage. If your company vehicle is involved in an accident, especially if your driver was responsible for it, having sufficient insurance coverage is critical.
- Real property coverage. If your building or buildings are affected by floods, fire, earthquakes, or other disasters, without sufficient insurance coverage your material losses may be compounded by substantial downtime until you can afford to rebuild.
- Cyberattack or online hacking. For some businesses, this is a real concern because if customers’ sensitive financial and/or medical information is leaked to outsiders. There are legal requirements for safeguarding this information and if a company does not make a reasonable effort to protect it, it opens them up to liability issues.
2. Continue to review your insurance coverage periodically. As your company grows or downsizes, expands locations, or makes other major changes, your insurance needs are likely to reflect those changes and should be modified accordingly.
3. Consider offering alternative health coverage options such as pretax benefits afforded by cafeteria plans and flexible spending plans. Talk to an insurance agent about whether or not programs like these might be a good fit for the size and nature of your small business.
4. If you offer clients or customers professional advice, you may need a separate rider to protect your small business in the event that your advice led to catastrophic results and open your company up to a civil lawsuit. This is usually referred to as Errors and Omissions coverage.
5. Find the right insurance company and representative. When you work with an insurance representative who understands the market that your small business focuses on, this can go a long way with getting you the right kind and amount of coverage. They may also be able to offer insight as to what coverage your company may need in the future.