Determining Your Need for Small Business Insurance

Determining your need for small business insurance is one of the first steps of starting your own business. As with any form of insurance, small business insurance protects you from the financial implications of unexpected losses and liabilities. Having that peace of mind is enough to convince some small business owners of its merit, but it is also very expensive. Each business has different levels of risk, from having policies for office relationships to ensuring everyone has proper safety training, so explore your options before making a decision. If you are still on the fence, consider how much more expensive it could be not to have insurance if disaster strikes.

If you own a fireworks factory or a chemical plant, it's pretty clear that you need insurance. But even low-risk industries can benefit from things like liability coverage. If a customer trips on the sidewalk in front of your yarn shop, you could be sued for negligence. If someone steals all of the merchandise from your toy store, you may have lost your whole livelihood. A fire or natural disaster can ravage any business, and all of these scenarios are compelling reasons to purchase small business insurance.

If your employees drive or operate machinery, you must have insurance. If your building is leased or mortgaged, the property manager or financing company will probably require that you have property insurance. Otherwise, it is the owner's discretion whether to buy the various forms of business insurance available. Obtain rate quotes from several providers to compare, evaluate your budget and then decide how much coverage you can afford.

Types of Small Business Insurance

Any business that involves face-to-face interaction with people should consider liability insurance. If someone is injured or experiences property damage on your property, you could be sued for negligence. Courts can award judgments of millions of dollars to plaintiffs, and settlements to avoid litigation can be just as expensive. Those costs, plus legal fees and the sheer amount of time a lawsuit takes can cripple your business. Liability ensures that the costs are covered up to your designated coverage limits, and the insurance provider takes care of legal counsel, negotiations and all other aspects of a negligence suit.

Property insurance covers your building and the contents therein. If the roof is blown off by a tornado or the computers are stolen by a disgruntled employee, property insurance covers your loss up to your coverage limits. Most politics include only named perils--fire, windstorm, theft, vandalism, burst pipes, fallen objects, vehicle collisions and more--so check the exact terms of coverage before signing on. If you work in a flood, hurricane or earthquake-prone area, you may need to add endorsements or riders to the policy to cover those perils. Valuable property like equipment, jewelry or expensive electronics may also call for endorsements to cover those particular items.

If you have several employees, consider worker's compensation insurance. If an employee is hurt on the job, worker's compensation pays a specified amount of leave and medical benefits. Worker's compensation often serves as an agreement that the employee will not bring a negligence suit. Offering health and life insurance benefits for employees is also beneficial to your company in the long-run. Good benefits attract top talent and keep employees happy in their jobs.

If you are wondering whether small business insurance is for you, it probably is. Of course, it is not that simple for most business owners. Speak with your company attorney or seek short-term start-up counsel to discuss the role small business insurance can play in your company's success. Once a disaster occurs, it is too late to protect yourself. Taking measures to safeguard your assets makes good business sense.

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