Are You Covered? Types of Insurance You Need to Protect Your Small Business
As I work through the realities of a new situation, I once again need to consider the insurance needs for my business. Many small business owners don’t think about all the insurance realities associated with their businesses. It’s easy to overlook some of the details, but if you aren’t careful, what you don’t take care of can come back to haunt you.
Health insurance
First of all, it’s important to get health insurance when you’re self-employed. If you don’t have the help of a life partner to ensure that you have the coverage you need, you will need to look to your state health insurance exchange, or go to the private marketplace.
Health insurance is required by law, and it’s smart to have it anyway, since medical bills are a leading cause of bankruptcy.
Don’t forget, if you have employees, you probably need health insurance for them as well. Someone like me, who doesn’t have employees and contracts out via 1099, doesn’t have to worry about this. However, other small business owners need to be aware of the requirements under the PPACA. This means understanding the law if you have 50 or more full-time employees, and ensuring that you have the right programs for their use.
Auto insurance
Most of us think of auto insurance as something to consider on an individual basis. However, if you have a fleet of cars, or if you ask your employees to drive as part of their duties, you might need auto insurance. Consider that men and women often are charged different rates. In fact, insuring your female employees might make more sense, since car insurance is often cheaper for women.
Also, don’t forget that where you live can also make a big difference. Not only do business owners pay more for business licenses, taxes, and other items when living in states like New York or California, but they're also charged higher insurance premiums; states like New Jersey and California have higher insurance premiums.
Carefully consider whether or not you need your employees to drive, and whether or not it makes sense to have a fleet of cars for your business. If you live in an expensive state, it might not be worth it if you can avoid having to buy auto insurance for your business.
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Finally, don’t forget that sometimes using your car for business isn’t covered in your regular auto policy. If you are in a wreck while on business, you might only have limited coverage. An additional rider might be needed in order to cover business use of your private car.
Homeowners or renters insurance
One of the things I discussed with my insurance agent after I moved was whether or not my renters insurance policy covers business use of my home. My old policy, in a different state, covered up to $1,000 for property loss in my home office. My new policy, though, doesn’t have even that meager coverage. If I want to make sure that my home office is covered under my renters insurance, I need to buy an additional rider.
Even if you own your home, your business might not be covered. Many homeowners policies don’t completely cover the business use of your home--and this includes liability. If workers or clients are injured while visiting your home-based business, you might be on the hook for everything. Double-check your policy and get additional coverage if necessary.
Additional liability insurance
In some cases, you might want additional liability insurance as a business owner. As your business grows and you start seeing an increase in assets flowing into your personal accounts, you might want to boost your insurance level. Umbrella insurance can be one way to boost your liability amounts to more than $1 million. Consider this for your personal assets as your business begins allowing for the flow of more money into your own personal economy.
Errors & Omissions (E&O) insurance
Some business owners find that they need other types of coverage because of the work they do. Financial planners and other professionals (like lawyers) that offer advice might find themselves sued if their advice doesn’t pan out. You can use all the disclaimers you want, but sometimes you may end up having to deal with these types of lawsuits.
Doctors with their own practices might also want their version of E&O insurance: malpractice insurance. No matter how hard you work and how hard you try, there is the possibility that you could end up making a mistake that someone sues you for. The right insurance coverage can help you avoid complete devastation.
Disability insurance
Finally, don’t forget the possibility that you might be unable to carry on with your business due to an injury. Covering yourself with disability insurance can make sense because it can help you with your cash flow.
Don’t forget that it might also make sense to get a business owner’s insurance policy that covers loss of business income. If you are involved in a natural disaster, you might not be disabled, but your business location could be destroyed or there might be some other problem. Make sure you are prepared for this possibility by getting proper coverage.
Also, remember that your employees might need coverage. Even if you don’t worry about offering disability as a benefit, you probably need to pay into your state's workers’ compensation fund. Learn about the workers’ compensation requirements in your state so that you aren’t caught in a bind later on.
With the right approach and the right policies that meet your business needs, you can protect your assets and your business from most problems.
