There is insurance for everything (even paranormal infestations). So it’s no surprise that there are as many types of insurance for your small business as there are for other parts of your life.
Almost all small businesses can benefit from business insurance — and yes, I include freelancers and freelancers. However, the specific type(s) of insurance required for any business will vary by industry and services.
We’ll examine some of the most common types of business insurance so you can find out what your business needs.
1. General liability insurance
As the name suggests, general liability insurance covers many liability situations that you may face as a business owner. Some common examples would be:
- Liability for bodily injury and property damage
- Personal injury
- Medical bills
- Ad Damage (Copyright Infringement)
- defamation (defamation, defamation, etc.)
Remember that liability insurance covers damages to third parties, not you (the original party). For example, it does not cover theft or damage to your own property.
2. Professional Liability / Errors and Omissions Insurance
In addition to general liability insurance, small businesses that provide services should consider professional liability insurance. This includes jobs such as accountants, designers, consultants and real estate agents.
Sometimes called an errors and omissions (E&O) policy, professional liability covers a business if it is accused of negligence by clients or patients. In other words, if a mistake is made, something is forgotten, something is simply messed up — and your business is sued for it, an E&O policy can cover legal fees and any settlement costs.
3. Cyber security insurance
There are over 1,000 data breaches every year. If your business is victimized by someone, you can be hurt in all sorts of ways. For one thing, your company’s data can be stolen, which can be expensive to retrieve (even if possible).
At worst, customer data can be stolen (putting you on the hook for their losses). Cybersecurity liability policies can include coverage for things like data recovery, digital security enhancements, and customer indemnification.
4. Commercial auto insurance
There are two common situations where you need commercial car insurance.
- You are driving a vehicle owned by your business.
- You are driving a private car while doing business.
In either case, your personal auto insurance may not be applicable, which is why a commercial policy is important. Commercial automobile insurance covers many of the same things as personal auto insurance, including injury and damage liability, as well as vehicle damage such as theft or weather events.
Rideshare Insurance
A common reason to use your personal car for business purposes is if you work as a contractor for a rideshare company. While some rideshare companies offer limited insurance coverage to their drivers, there may be gaps, such as if they are not active on car trips. If you’re “on the clock,” you may need Rideshare support to cover any gaps, as private insurance policies may not kick in at all.
5. Commercial property insurance
Commercial property insurance is basically like homeowners insurance, but for the property you buy for your business. It covers the building(s), as well as items such as furniture and fixtures, for incidents such as fire or falls. As with homeowners insurance, you may need special assistance if you want to get flood insurance for your business property.
6. Business Income / Interruption Insurance
If you have a good commercial property insurance policy, your building and inventory are likely to be covered. But what about the business you lost while renovating or building your office or store? That’s when business income (sometimes called business interruption) insurance kicks in.
This type of policy can help cover costs if your business is closed due to a covered event, such as fire or theft. Typical coverage may include:
- Lost net income
- Rent, lease or rental payments
- Loan or credit card payments
- Temporary release costs
- Salary expenses
- Standard accounts
For example, say your small coffee shop has a fire. Commercial property insurance can cover the costs of maintaining the building, and can cover any broken or damaged equipment. But it doesn’t do anything about the money you lose when those repairs are made. Business income insurance can cover lost income and help you pay wages in the meantime.
7. Home based business insurance
While some types of businesses run from commercial locations, many of us run our small businesses from our homes. That doesn’t mean you can skip some type of commercial property insurance — even if you have renters or homeowners insurance.
Typical homeowners insurance has limited coverage for equipment and/or inventory related to a home business. If your existing policy doesn’t provide enough coverage, you may need a home-based business policy to get adequate protection.
8. Special event insurance
Many types of special event insurance are marketed to people who organize their own events, but if you are a professional organizer, it may be worth taking out. This type of coverage protects event planners against all kinds of conditions such as injuries, damage to venues and sudden weather events. It can also apply for damages if a vendor goes out of business or the event is cancelled.
9. Intellectual property insurance
There are two main types of intellectual property (IP) insurance:
- Infringement protection; This is what you need if your company infringes on someone else’s IP and gets sued.
- Reducing enforcement coverage: This is what you need if you want to sue someone else for using your IP.
Many general liability policies include some form of coverage for violations under their notice liability clauses.
However, if you’re in a very creative field and intellectual property is your bread and butter, you may want a separate policy or endorsement with discounted enforcement coverage to help protect your trademarks, patents, and other copyrights from theft or misuse. .
10. Worker’s Compensation Insurance
Workers’ compensation insurance is a mandatory legal requirement if you have any employees. Failure to have the required workers’ compensation insurance can result in severe penalties.
A standard worker’s comp policy covers many related expenses if an employee becomes ill or injured while on the job. This may include:
- Medical bills
- Lost wages
- Recovery
- Funeral expenses
- benefit of death
Some workers comp policies can help cover legal expenses if there are lawsuits due to a covered incident or illness.
11. Product Liability Warranty
No matter how many rounds your products go through, something can still go wrong. If that’s the case, you’ll need insurance to cover your products. Product liability insurance helps protect your business if a product you manufacture, distribute or sell is defective and causes personal injury or bodily injury.
Note the last one about injury and damage. This type of insurance does not kick in if there is a printing error on the t-shirt and you have to issue a refund. But if the t-shirt turns out to be radioactive and your customer suddenly has two heads, well, you probably have a product liability claim.
12. Commercial umbrella insurance
Even the best insurance has a cap on how much it covers. If you think your regular business insurance policies don’t provide enough coverage, a business umbrella policy can help cover any excess.
For example, someone slips and falls in your office and sues them for $1 million. If your general liability policy has a maximum of $500,000 for personal injury, an umbrella policy can cover the remaining half a million.
If you have a small home business and no employees, an umbrella policy may not make sense. But it can be useful if you have a lot of customers and/or employees visiting your business properties, or if you spend a lot of time on other people’s properties.
13. Compliance with Business Owner Policy (BOP).
In the same way that you bundle personal insurance, you can buy prepackaged business insurance. For example, many insurance companies offer you a business owner’s policy (BOP) that combines both property and liability insurance into one policy. Specific coverage options vary by provider, but you can often add additional support if you have other needs.
Consolidating your business policies into a BOP makes tracking them much easier. It can also be cheaper than buying individual insurance policies.
Some coverage is usually better than no coverage
No matter how small your business is, you should definitely consider getting the proper business insurance. We see few that come until problems arise. If — or, let’s face it, when is — something goes wrong, you’ll be glad you were prepared.