Top 10 insurance coverages your small business needs:
1) Business Owner’s Policy (BOP): Business owner’s policies typically package all the insurance coverages small businesses need (and sometimes coverages they probably don’t need) into one policy. A BOP usually provides the best bang for your buck but they are not available for every type of business. If your business does qualify for this type of policy a BOP is most likely your best option. Just don’t make the mistake of assuming the limits for all the “add-on” coverages included in a BOP will meet your company’s needs.
2) Worker’s Compensation: Worker’s compensation is essential coverage if you plan on hiring even one employee. Worker’s comp coverage is required in all states. In Rhode Island if you are found to not have the proper coverage in place you can be fined up to $1,000 a day. Additionally, if an employee is injured on the job, your business (or you personally if you are a sole proprietor) can be held liable for your worker’s injuries.
3) General Liability: General liability is typically included in a business owner’s policy described above. General liability coverage is one of the most important types of insurance that every business needs. Liability coverage protects your business from bodily injury or property damage caused by you, your employees or your products and services. Some small and home-based businesses may find a stand-alone general liability policy more affordable than a full BOP. Larger and higher-risk businesses may also benefit from a stand-alone liability policy as part of a complete business insurance package prepared by your independent agent.
4) Property Insurance: Like general liability, business property insurance coverage is typically included in BOPs. Also like general liability policies, your independent agent may recommend stand-alone property policies over a BOP for many reasons. This property coverage can protect business owned property (including your building and business personal property) while it is on your business’s premises.
5) Commercial Auto Insurance: If your business owns any vehicles and/or if you or your employees use their personal vehicles for business purposes, commercial auto coverage is a must. Companies can be held liable for any property damage or bodily injury caused by any vehicle while being used for your business purposes. Even if your business does not own a vehicle that you are able to add to a stand-alone commercial auto policy, you can typically add “non-owned” business auto coverage to either your general liability or business owner’s policies.
6) Business Interruption Coverage: If your business were to experience a business-related insurance claim, would you be able to continue your operations? Without your current level of business income could you continue to pay your employees and cover your overhead? Does your business have the reserve funds to cover the expense of operating out of a temporary location or deal with the reduction of sales following a claim? Over 50% of businesses go out of business after they experience a claim. Many businesses are barely operating in the black after covering all their expenses and a significant claim could cause the house of cards to come crashing down. Make sure that you have the proper business interruption coverage that will pay for the lost income and the extra expenses incurred while getting your business to pre-loss condition.
7) Inland Marine Coverage: If you are like most modern businesses, chances are you are taking your business personal property off-premises. BOPs and stand-alone property policies usually limit business property coverage to within 1,000ft of your described premises (the named location of your business.) If you take any of your business property off-premise (e.g. laptops to a meeting, tools to a job site, inventory to a trade show) you may lose your property coverage. BOPs may provide limited property off-premises coverage, but most stand-alone property policies do not. If you take any business personal property away from the named location on your policy a separate inland marine policy may be required to ensure that property has the proper coverage.
8) Data Breach Coverage: Data breach or Cyber Liability coverage is quickly moving up the ratings to become an important coverage that all business need to consider. Even if you are not an internet-based business and even if you don’t collect any customer’s personal identifiable information, there is still a significant exposure. If you have employees, you likely have collected their sensitive information and therefore have a first-party exposure. Also, most of the recent large data breaches publicized were a result of negligence of a third-party contractor. If your business does business with any other company that collects personally identifiable information hackers can use your network and relationship to gain access to that information and put your business at risk of being held liable. Some data breach coverage may be included in your BOP policy but make sure you fully understand what coverage is provided by those endorsements.
9) Professional Liability Coverage: Also known as Errors and Omissions Insurance protects your business from claims arising from your failure to provide or improperly rendering your professional services. This coverage is typically associated with business professionals like accountants, architects, consultants, insurance agents, lawyers, real estate agents, etc. However, professional business services are not the only companies that need this coverage. Consider a child care provider that accidentally gives peanut butter to a child with a nut allergy, a hairstylist who damages a client’s hair, an arborist who accidentally cuts down the wrong tree. Professional liability is not included in your general liability coverage, make sure you discuss the differences with your independent agent.
10) Life Insurance: As a business owner it is important to consider what might happen to that business if you or a business partner were to die unexpectedly. Business owner’s need life insurance for the same reasons any individual might need the coverage: income replacement for your spouse and family, coverage for outstanding debts like your mortgage or car loan, and future expenses such as college for your children or retirement for your spouse. In addition, business owners also need to consider life insurance if they own the business with a partner or have other key employees essential to business operations. All business owners should consider developing a buyout agreement for partners and/or shareholders funded by a life insurance policy to protect the future of the bushiness following an unexpected death.