As a small business owner, you have probably dedicated a good amount of your time and energy to building your company and keeping it afloat. There are so many aspects to consider and no matter how much planning you have done, the unforeseen expenses keep piling up. You are so busy trying to make a success of your business that it’s very possible that you have put the application for insurance on the backburner with the intention of getting to it “when you have time”.
As a dedicated entrepreneur, there really will never be enough time for everything. It’s important to note, however, that having the correct insurance in place for your businesses should be at the top of your To Do list with priority status. While it might seem like a hinderance since there are more exciting things happening in the world of business, you wouldn’t want to be in the position where you are caught off guard and things go south.
Applying for the correct insurance options at the right amounts can make the difference between a thriving business and one that is crippled due to the failure of securing the right policy with suitable cover. This is why it is ever so crucial that you consider the different types of insurance a small business should have and then decide which is applicable to you and your company. Once you have done your research, it’s best to consult with an insurance agent before finalising your application or requesting insurance quotes.
To assist you with your next step in securing your business, we have compiled a list of 10 types of insurance a small business should have:
- Liability Insurance
Whether you are running a small one-man business from home or a larger entity from an office block, general liability insurance is definitely one of the insurance options that you will need to put in place.
This coverage will protect you in a situation where you, your employees or even the surrounding property somehow causes bodily harm to an individual or damages their personal property. It also provides coverage to you as a tenant if you rent office or shop space and happen to cause damage to the rented property.
In essence, this type of coverage protects you from any claims made against you where another party holds you or the space where you run your business from liable for any injuries, illnesses or damage to third party property. The insurance will pay out to cover legal or medical costs that might incur.
- Insurance for Your Property
If you own your business’ premises or if you own a lot of expensive and valuable equipment that you use to run your business with, then property insurance is a requirement and be a life saver. This type of cover pays out when your building or your property is damaged, stolen or vandalised and needs to be replaced urgently. It’s also great to have if you live in an area where the weather can be unpredictable since it will cover any damage caused by floods, storms, hail and even heavy snow.
With this insurance, you might possibly also want to consider business interruption/loss of earning insurance as part of the protection cover, this will help you if your business cannot operate efficiently due to the loss or damage of your goods. You process a claim so that your cash flow can remain intact as you try to recuperate your lost or broken items. We’ll discuss business interruption/loss insurance in more detail below.
- Business Income Insurance
Picture an incident where the cause and effects prevent you from operating your business efficiently. This now means that you have lost your steady income and you cannot cover business costs or your personal expenses. This is quite the unappealing situation to be in, right?
This is where Business Income insurance steps in and can be of great assistance. A policy like this will replace income that is lost in the unfortunate event where a business is unable to operate due to property loss, damage or theft.
If your company relies on a physical address, equipment or other items to generate an income, you might want to look into increasing your business income coverage with endorsements to your existing property insurance policy.
- Commercial Vehicle Insurance
Commercial car/auto insurance is coverage that protects vehicles that are owned or used by the company. To run a business one needs transportation, either to get their products or services from point A to B or to transport their employees to work and back each day.
With commercial vehicle insurance, you can acquire cover for your work cars, vans and trucks, ensuring that you can claim for any damage or loss. This way, if you find yourself without a vehicle or one that is not roadworthy, you can easily replace the vehicle or parts so that your business can once again get into the swing of things. In many countries, vehicle insurance is mandatory for any person or entity that has a car registered in their name.
If your business is not in possession of any company vehicles, but your employees drive their own cars for your business, then you should add non-owned auto liability to your policy to protect your firm from a situation where your employee does not have auto insurance or has inadequate coverage. This way you can rest assured knowing that transport is covered even in worst case scenarios.
- Workmen’s Compensation
Many countries dictate that Workmen’s Compensation, also known as Employer’s Liability Insurance, is a requirement when hiring one or more employees, making it a necessity and not just an option. This type of cover not only provides salary replacement and medical benefits to employees who are injured while working, it also protects a business owner from being sued by the employee for the incident.
If your country’s law stipulates that Workmen’s Compensation must be accounted for within your business, then you have to make sure you apply for the cover. If you fail to do so, you could possibly be penalised for this neglect.
- Professional Liability Insurance
If your company offers a consultancy service or a professional skill, then Professional Liability Insurance might be applicable to you. Examples of advisory and professional skills companies include the likes of law firms, interior design businesses, hair salons, and accounting officers.
Sometimes referred to as Errors and Omissions Insurance, this type of cover protects an entity from legal expenses that might occur when a claim of negligent advice or miss-service is laid against a company. It also covers the cost of compensation in a scenario where a customer might incur financial losses due to error and omission, misrepresentation, poor delivery of skills or breach of confidentiality on the business’s part.
Even if your business sells products instead of running as an advisory service, there are instances where you might give a customer information on a product or advice on how to use it. If you provide the incorrect information or make promises that can’t be delivered by the product, then you could also find yourself being sued for giving negligent counsel. This makes Professional Liability Insurance a crucial component of most companies and the security could be well worth the monthly premium.
- Keyman Insurance
Many small businesses rely on the skills and role of one or more employees to keep the company afloat. If one of these key employees were to pass away or become incapacitated to the point that they can no longer work, then they day-to-day functioning of a business would suffer and so would the account.
To ensure that company owners have a chance to continue business as usual and to keep a stable income despite their key employees not being there, one would put Keyman Insurance in place. In essence, an entity will apply for a life insurance policy on its key employee(s). The entity is responsible for paying the premiums and is the beneficiary of the policy. If one of the covered key employees dies, is injured or falls ill to the extent that he or she is no longer capable of working, the company then receives the insurance payoff. This comes in the form of a cash injection which can be used to cover lost income, the hiring and training of new employees or to pay off any debts that might have been incurred by the employee on the company’s behalf.
- Data Breach Insurance
When a customer provides your business with information, it is up to you to keep this data confidential and protected. These days many companies reach out to larger market scopes through the use of social media and e-commerce platforms. As such, data protection laws have been actioned to address the possible consequences of unauthorised sharing of both personal and corporate information. These laws even apply to those who do not host the data themselves but instead outsource it to a third-party provider or store it on the cloud. In this event, you are still legally responsible for information entrusted to you by your clients.
When applying for a Cyber Liability and Data Protection policy, make sure that the underwriter includes cover for your own costs incurred when restoring lost data as well as for cyber extortion, notification and public relations costs, legal fees, and third-party claims. If your business uses an e-commerce site or a payment gateway, this type of insurance will also offer you security if a cyber-attack occurs and your website has been suspended, preventing you from taking orders or collecting payments as a result.
- Marine Cargo Insurance
This type of insurance falls into more of a niche category and only applies to businesses that import or export products. If your company runs on this basis then it is imperative that the imported and exported goods are covered correctly. In the case where items are damaged, destroyed or go missing during their transit from one port or country to another by air, sea or land, Marine Cargo Insurance will ensure that a claim is paid out to cover the loss of property and your investment.
A Marine Insurance policy can also be written to not only include goods that are transported across oceans and borders, but also goods that are simply shipped domestically and can also include warehouse coverage and more.
- Business Owner’s Policy (BOP)
In instances where you need more than one type of insurance for your business, it is often more affordable to apply for a Business Owner’s Policy than to put separate policies in place. This is because BOP combines your selection of cover needed to form a packaged solution that is usually quoted at a reduced rate.
Generally, a business owner’s policy will include business income insurance, property coverage, auto insurance, liability insurance, and workmen’s compensation. Most insurance companies will allow you to alter this list, however, so that you can get pick and choose between the options and get the best overall coverage suited to your business requirements.
As an entrepreneur, your main focus needs to be on the performance of your business and you are not expected to be a genius when it comes to the knowledge of business insurance. You do have to make sure, however, that you align yourself with someone who is knowledgeable about the industry and is also both honest and reliable. An experienced insurance broker or agent can help you find the best cover for your business so that you pay less on premiums but still remain fully protected.
We understand that every business is unique and that the risk will differ depending on your niche and size. Whether you operate a hair salon or a large accounting firm, it’s important that you get the correct cover to make sure that your business is secure and that unfortunate and unforeseen events do not force you to close your doors altogether.