Business Insurance is Critical to New Ventures
Starting your own business is a challenge; there’s so much to learn, and finding answers isn’t always easy.
But one item you’ll want to investigate immediately is business insurance; in launching a new venture, you’ll be making a sizeable investment, and insurance will protect it.
Many otherwise savvy business owners have lost their companies by being unprepared for the unexpected: Hurricanes, product recalls or an injured worker could put your company at risk without the appropriate insurance coverage.
As a rule of thumb, buy sufficient insurance to cover your assets. However, in many cases, the insurance coverages you need – while technically up to you – are required or recommended by others.
If you’re an employer
If you plan to employ workers, most states require you to have workers’ compensation insurance, which pays for medical care and replaces lost wages for employees injured in your employ. In exchange, your employee generally relinquishes his or her right to sue you for negligence.
As an employer, you’ll also be required to buy unemployment insurance and disability insurance.
Most states also require commercial auto coverage if you’re using a vehicle for business purposes. As well, your lender may insist on you purchasing life insurance, certain kinds of disaster insurance and business interruption insurance.
Most importantly, and no matter what business you’re in, you’ll require general liability insurance. This will cover you in case of a legal problem resulting from accident, injury or negligence claims.
Depending on the liability exposures associated with your business, you may also need an umbrella policy. Umbrella insurance is liability coverage that protects your company’s assets over the liability limits you purchase on your primary policies.
The business you’re starting helps determine the types of coverage you should consider. Companies manufacturing or distributing a product will need product liability insurance in the event of a defective product that causes injury.
E & O
Professional services vendors, environmental consultants and tax preparers need professional liability or errors and omissions (E&O) coverage. An error or omission is a mistake that causes financial harm to a business or a person.
If you have an office or factory, commercial property insurance is critical. This type of insurance covers loss and damage to your property caused by a number of events, such as fire, vandalism and wind storms.
Even without a brick-and-mortar property, you might be wise to investigate property insurance, as the definition of property includes equipment and cash.
Home-based businesses generally are not covered by homeowners’ policies, as many people believe. In some cases you can add riders to cover damage of business property, but, depending on your home business, you may need to invest in additional general liability and/or E & O coverage.
New ventures require specific coverages tailored to their unique business operations; it’s important to consult with your insurance professional, who will help you select the coverages you need. For additional information, the Small Business Administration has a very useful website with business insurance information at: sba.gov/content/business-insurance.