Finances & Money

3 Types of Insurance every Small Business should have

And 3 more they should strongly consider

Small Businesses have a tremendous amount of costs associated with being in business. Making payroll, purchasing the right amount of supplies, and even keeping the lights on at your facility amount to an immense amount of money even for a small business. Insurance is one cost that most business cannot do without. Some coverages, like general liability and workers’ compensation, are required by law for most businesses in most states throughout the country. These are not the only coverages needed by most businesses and it is difficult for most new business owners to determine what exactly they do and do not need. If you are a business owner, here are six coverage to strongly consider whether you are a restaurant owner who needs general liability or you are in need of home health care workers comp.

General liability

General Liability Insurance will cover your business when damage occurs to third parties that is the result of the actions of you or your employees. Third parties include customers, the general public, vendors, or anyone that could potentially be damaged by the actions of your business. These damages can be both to property or bodily injury.

Workers Compensation

Workers’ compensation insurance, as well as general liability, are required by law for most businesses in most states. For this reason, these are the first two policies any business owner purchases. Many people refer to workers’ compensation as the ‘exclusive remedy’.  It is called the ‘exclusive remedy because it gives workers the confidence to know if they are injured on the job, they will have their medical costs and some lost wages covered for the time they are not able to work. At the same time, employers benefit by not having to worry about being sued for injuries that occur as a normal part of business operations.

The workers’ compensation policy typically provides for medical costs and 60 percent wage replacement while the injured worker is out of work. Depending upon the state you operate in this may be required to be paid out for a few years. This is why it is important to have adequate safety programs in place and an effective return to work program that encourages injured workers to reenter the workforce. It only takes one injury to get out of hand for your business to rack up a large expense to your insurance carrier. This cost impacts your experience modification rating that is the main way carriers determine how much to charge your business for premium.

Business Interruption

Business Interruption Insurance Coverage protects your business if you have to be closed for an extended period of time due to a covered loss. The important part of this coverage to understand is that the reason you are closed has to be covered by another insurance policy. If you are the victim of a hurricane or a flood and you do not have this coverage in place, then the business interruption coverage will not kick in. This coverage is typically included as a part of a business owner’s policy (BOP).  Business Interruption Insurance will cover either your net profit, or the “Actual Loss Sustained” if you go out of business for a period of time. This coverage can prevent you from losing staff and not being able to pay bills due to not having enough income while the business is closed.

Here are three policies to Strongly Consider

Employment practices liability insurance (EPLI)

EPLI is an insurance policy designed to protect your business from lawsuits relating to the employment process. Everything thinks they have trustworthy employees who would never sue the business, until they have one who does. Over the past decade these types of lawsuits have increased significantly. If you stay in business long enough, chances are you will face an employment lawsuit. When deciding if you are going to purchase this policy, it is important to keep in mind that a lawsuit does not have to be founded to cost your business an enormous amount. Also, you do not have to be found guilty of the charges for your business to take on an enormous amount of legal fees to prove your innocence.

Cyber Insurance

Cyber insurance deals primarily with damage that occurs as the result of a data breach. It is sold as two policies that are commonly packaged together, Data Breach and Cyber Liability. The two types of coverage are divided in to first and third person coverage. Data Breach Insurance deals with the first person liability of your business. This policy covers the damage that is caused to you and your business directly. Cyber Liability Insurance deals with third person liability your business faces for damage done to third parties as a result of a data breach within your business.

Inland Marine

Inland Marine Insurance is also known as ‘equipment coverage’ or ‘floaters insurance’. Inland marine insurance is a specialized form of property insurance designed for specialized equipment that is frequently in transit. It is commonly needed for businesses that have equipment that is intended to be moved, like a lawnmower for a landscaping company. It can also apply to a logistics or shipping company when a product is being shipped. If you have a lot of or expensive specialized equipment, your business more than likely needs this coverage.


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Susan Paige

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