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7 Types of Insurance You’ll Need to Start a Small Business

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Having the right business insurance can help protect your new business in its infancy.

If you’re starting a small business and wondering if you need insurance, the answer is YES. Every business owner needs business insurance to help manage risk.

Contact Steve Blanchard

“Having the right insurances in place helps you gain confidence with your customers, letting them know you are a legitimate entity looking out for everyone’s best interest,” said Steve Blanchard, PayneWest Insurance account manager specializing in the small business sector. “Simultaneously, it provides you peace of mind knowing that your livelihood and your business assets are protected.”

Let this guide help you determine what insurance is a must-have as a business owner and other insurances you may need depending on your type of business, the business property you own and your employee structure. Be sure to consult your commercial insurance specialist to help you assess your risks and ultimately determine the best insurance policies and risk management strategies that will help you manage them.

 

General Liability Insurance

Every business owner needs general liability insurance. This policy provides protection against common customer or client incidents. The average customer injury or property damage claim is $30,000 and can lead to expensive legal bills, making this one of the most important policies for any business.

What’s your risk? Claims of bodily injury, property damage and advertising injury by customers, delivery people and other non-employees.
Example: A customer slips and falls while in your place of business and incurs related medical expenses.
What insurance covers? Medical costs, lawyer’s fees, court costs, settlements, judgments.

 

Professional Liability Insurance

Professional liability insurance (also called errors and omissions or malpractice insurance) is designed for businesses that provide clients their expertise, such as accountants, architects, engineers, IT professionals and consultants. Even the most experienced and thorough professional service provider can make mistakes, and some clients may not be understanding if an error costs them considerable time or revenue.

What’s your risk? Legal defense costs when a client or customer suffers a financial loss due to your professional services or advice, such as work mistakes and oversights, undelivered services, missed deadlines, claims of negligence and breach of contract.
Example: You miss an important deadline that causes your client to lose revenue, and they sue you.
What insurance covers? Lawyer’s fees, court costs, settlements, judgments.

 

Workers’ Compensation Insurance

If you have employees, most states require businesses to carry workers’ compensation insurance. As soon as you hire your first employee, you will need a workers’ comp policy in place for protection against medical expenses and employee lawsuits related to workplace injuries.

What’s your risk? Current employees experiencing on-the-job injuries, illnesses or even death.
Example: Your employee falls off a ladder on a work project, suffers injuries, and incurs medical costs and lost wages.
What insurance covers? Medical bills, missed wages, death benefits.

 

Commercial Auto Insurance

If your business owns a vehicle, most states require you to carry commercial auto insurance.

What’s your risk? Drivers, property owners or other third parties who incur injury or property damage involving a business vehicle.
Example: You are at fault in a crash driving your business vehicle causing damage to your vehicle and another.
What insurance covers? Auto accident liability, medical payments, physical damage and collision, accidents involving uninsured motorists.

 

Commercial Property Insurance

In case of theft or disaster, commercial property insurance is an important coverage for many small businesses to help replace what is needed to keep a business running, such as commercial buildings, tools and equipment.

What’s your risk? Damage or loss of property due to fire, theft or natural disaster.
Example: Your place of business burns, and your building and equipment are damaged.
What insurance covers? Repair and/or replacement of covered business assets.

 

Cyber Insurance

Cybercrime — namely ransomware attacks and data breaches — are on the rise, exposing the digital assets of businesses of all sizes. If your servers/cloud storage store personal customer information or if your operations would be shuttered if you were forced offline, cyber insurance is definite consideration.

What’s your risk? Secure business and/or customer information is exposed and/or your online operations are shut down.
Example: A data breach occurs exposing your customers’ personal information.
What insurance covers? Security investigation, cyber extortion and negotiation, legal expenses, PR assistance, customer credit monitoring and notification costs, business interruption expenses.

 

Employment Practices Liability Insurance

If you have employees, employment practices insurance can protect your small business when a worker sues over employment-related issues.

What’s your risk? Claims by current, former or potential employees for civil rights or fair work-environment violations, such as harassment, discrimination, wrongful termination or demotion, and breach of contract.
Example: An employee claims they were discriminated against by a manager and sues.
What insurance covers? Lawyer’s fees, court costs, settlements, judgments.

 

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This content is for informational purposes only.  Consult your actual insurance policy for details regarding terms, conditions, coverage, and exclusions.

 

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