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Insurance is available for nearly every peril a small business faces, but smart owners buy only the policies they really need. Before shopping for insurance, thoroughly research what perils a company in your industry is most likely to experience, and which can threaten your company’s survival. Consultant David Young says small business owners should only buy insurance to cover the out-of-the-park catastrophe that would irrevocably cripple their business.
Young suggests contacting your trade association and asking for any risk assessment tools, papers, or expert opinions for your particular industry. Most businesses will need a few of the basic policies. Workers’ compensation insurance is required almost everywhere and covers medical expenses, lost income, and rehabilitation for workers injured on the job, as well as death benefits should an employee die on the job.
Property insurance protects buildings and their contents, such as equipment, furnishings, and inventory, making it the most popular insurance for small businesses. General liability coverage is less common than property insurance, but arguably more important, because a claim for serious injury can be devastating. Liability covers any injury or damage a business’ employees may cause other people, their reputation, or their property.
Business vehicle insurance can cover cars and trucks a company owns or leases, rents, or even uses, and is recommended even when an owner or employee uses a personal car for work. Business interruption insurance can help a company rebuild following a disaster by replacing lost income and paying normal expenses.
Some special policies include key man insurance, which pays should an invaluable team member be unable to work, errors and omissions insurance, which is professional liability coverage, and directors and officers liability, which comes into play when companies have outside investors.
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