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Insurance options for small businesses: What’s right for you?

5 min read
Kim Mercado

Starting and running a small business is exciting, but it also comes with risks. It’s crucial to protect yourself and your venture from potential liabilities and unforeseen events. 

This is where business insurance plays a vital role. 

Depending on your work, it offers multiple protections, including financial, risk management and compliance. Investing in the right business insurance coverage is a step that ensures the long-term success and stability of your company.

Disclaimer: This content should not be construed as legal advice. Always consult an attorney regarding your specific legal situation.

Common types of small business insurance

The term “business insurance” often refers to multiple types of coverage (or policies) designed to safeguard businesses from different risks. 

For example, if you have a business open to the public, you might want general liability insurance to protect yourself from slip-and-fall lawsuits. If you have employees, you might be required by law to have workers’ compensation insurance. 

Learn more about common business insurance options:

General liability insurance

General liability insurance can help cover claims related to physical injuries, property damage and personal injury caused by your business operations. 

Imagine if a customer slips and falls in your store, resulting in injuries. The customer could claim your business is responsible for medical expenses, legal fees and potential damages. If that’s the case, general liability insurance can help cover some expenses.

Commercial property insurance

Commercial property insurance can cover structures and the equipment, inventory and furnishings you need to do business. It can provide financial help if your property is damaged or destroyed by fire, theft, vandalism or wind.

Consider what would happen if a fire broke out in your office, destroying valuable equipment and inventory. Without property insurance, you would have to replace these items out of your pocket.

Business interruption insurance is typically included as part of property insurance. This coverage helps compensate for lost income and ongoing expenses if your business is temporarily unable to operate due to a covered event.

Business Owner’s Policy (BOP)

A Business Owner’s Policy, or BOP insurance, is designed for small businesses. It combines general liability and commercial property coverage into a single package, providing comprehensive protection for a business’s physical assets, income and liability risks.

BOP insurance is a cost-effective solution for small businesses because it bundles multiple coverages into a single policy combined with a simplified insurance process.

Professional liability insurance

Professional liability insurance is crucial for businesses that provide professional services or advice. It can protect you from claims related to negligence, errors or misrepresentations in your professional work.

Workers’ compensation insurance

If you have employees, workers’ compensation insurance is not just a good idea — it’s often a legal requirement. This insurance can cover medical expenses, lost wages and rehabilitation costs if an employee is injured or ill due to work-related activities.

Imagine an employee slipping and injuring themselves while on the job. Without workers’ compensation insurance, you would have to cover their medical expenses and potentially face legal consequences. This coverage helps ensure that your employees are taken care of and your business is protected.

Cyber liability insurance

Cyber liability insurance is becoming more important for small businesses. This insurance protects against data breaches, cyberattacks and the resulting financial losses.

Consider the potential consequences of a hacker gaining access to your customer database and stealing sensitive information. Not only would you face potential legal liabilities, but the damage to your reputation could be devastating. 

Cyber liability insurance can help cover the costs of investigating and resolving the breach, notifying affected parties and even providing credit monitoring services to affected customers.

Commercial auto insurance

If your business uses vehicles for deliveries, client visits or any other business-related purposes, commercial auto insurance is usually required by law. This insurance covers accidents, damages and liability associated with your company vehicles.

Even if you use your personal vehicle and have personal auto insurance, it may not cover any commercial activities. If you were involved in an accident without commercial auto insurance, you would be responsible for repairing the vehicle, medical expenses and potential legal claims on your own.

Why it’s smart to have more than one type of insurance coverage

Insurance isn’t one-size-fits-all. Different insurance policies cover different aspects of a business’s risks and liabilities. Having more than one type of policy is important for several reasons:

  • Comprehensive coverage. By having multiple policies, businesses can ensure they have coverage that addresses various potential risks.
  • Tailored protection. Each insurance policy addresses a specific risk and provides coverage for particular situations. With multiple policies, businesses can tailor their coverage to their specific needs.
  • Coverage gaps. Relying on a single insurance policy may leave coverage gaps, as no single policy can protect all potential risks completely. Businesses can fill these gaps and ensure that all risk areas are adequately covered.
  • Legal requirements. Some insurance policies, such as workers’ compensation insurance, are legally mandated in many jurisdictions. By having separate policies for each legal requirement, businesses can ensure they comply with the law and avoid penalties or legal consequences.

As a small business owner, you can safeguard your business from unforeseen events by investing in comprehensive business insurance coverage. 

Assess your business’s specific needs, work with a carrier that offers the access and flexibility you need and grow your business now that you are ready for whatever comes next.