Small Business Insurance 101: What Coverage Do You *Really* Need? 

Property & Casualty, Small Business

When it comes to insurance, the answer to the question “What do I need?” is, “It depends.” It’s not as simple as plugging basic business information into a quoting tool and seeing what rate you can get for a standard level of coverage (though some may claim otherwise). As a small business, it’s imperative that you understand the different risks that you face, and the associated policies that can protect you from a potentially devastating loss.

Below, we’ve highlighted a few foundational policies that are relevant for small businesses, but we recommend always speaking with an insurance broker who has direct experience with organizations your size before you proceed with purchasing coverage.

If you run ANY small business…

You should have a general liability policy.

Every small business should purchase a general liability policy. And, that’s truly what it is: an investment. General liability coverage protects your business from lawsuits that may arise due to accidents in your organization: customer injuries, damage to your client’s property, unintentional trademark infringement, etc.

In fact, some contracts that you enter may require general liability coverage to be in place before they can be executed. It’s a good idea to carry this coverage for your (and your clients’) peace of mind.

If your business has “stuff”…

You should have property/inland marine insurance.

Whether you have a physical storefront or an office location that contains items that your business owns, it’s smart to have property insurance. This policy covers the replacement of items (tools, desk, computers) that you own due to loss (including fire, water, or wind damage, and theft), stock and inventory, and even the building itself.

If your business has employees…

You should have workers’ compensation coverage.

If your business employs W2 employees, you need workers’ compensation. This insurance protects you and your business from being sued if your employees are injured on the job. And, you don’t have to work in a hazardous industry for injury to occur. Employee injuries could be as simple as falling out of a desk chair or tripping on a cord – it’s better to be safe than sorry with this coverage.

You should have employment practices liability insurance.

Employment practices liability insurance (EPLI) is important for a small business who has employees but could not withstand the loss it would incur if a suit was filed for harassment, wrongful termination, or discrimination. A broker typically couples this coverage with D&O as it’s common to have both come into play in the event of a lawsuit.

You should have employee benefits.

Depending on the size of your organization, you may want to offer employee benefits. The first thing that comes to mind for you here is likely health insurance, however there are many interesting benefits on the market that could help you attract and retain great talent. A great benefits broker will be able to work with you to determine what benefits make sense for your business.

If your business has people who drive (even their own cars)…

You should have auto insurance (or hired and non-owned auto coverage).

If you have employees that utilize vehicles as a part of their job (even if it’s their own car – think rideshare or delivery services), your business should carry auto insurance. If an employee is in an accident, this coverage will help provide them with the help they need, while preventing a major financial loss to your organization.

If your business has assets…

You should have umbrella coverage.

The policies that we’ve mentioned above will go far to provide your business with protection. However, carrying an umbrella policy provides that extra layer of protection over your general liability, auto, and worker’s compensation coverages. This policy is not just for businesses who are extra risk averse – it’s for anyone who wants to ensure coverage of their assets from a loss that they could not have foreseen.

If your business has a Board or investors..

You should have directors & officers insurance.

Did you know that, in the event of a lawsuit against your business, your Board and officers’ personal assets could be at risk? Carrying a directors & officers insurance policies protects those assets from exposure during a mismanagement lawsuit.

If your company provides services…

You should have a professional/errors & omissions policy.

As a service-based business, there may come a time when your business commits an error or provides faulty products/advice to your clients. This insurance (known as E&O insurance most commonly) protects a situation like this from becoming a critical detriment to your business.

Key Takeaways:

Insurance policies are not one size fits all, even for small businesses. It’s important to consider the risks that we’ve laid out in this article, and to consult with a broker that is knowledgeable about small businesses before purchasing insurance. When you have the right coverages in place, you are better able to protect what you have built and position your business for its future success and growth.

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