Insurance for Small Business Owners: Essentials and Guidelines
Insurance for small business owners is a vital thing. However, many new startup owners forget about it. When launching a business, you need to think about all the required investments. Entrepreneurs invest in natural expenses: employees and rental fees. But, often, they don’t even think about insuring their business. Regardless of the type of business, insurance is always necessary. A third of startups fail in the first years of operation. But how do you choose profitable insurance and save money? Read on to learn this and more!
What Is Business Insurance?
Business insurance is not much different from life insurance. It also protects the object of insurance against accidents. Business insurance reduces financial, legal, and medical expenses as much as possible.
That is its most basic definition. There are many types of insurance for small businesses, as well as individual insurance. We’ll examine each kind and determine their purposes.
You should automate the working process to focus on insurance for your business.
There are a large number of programs that accompany small businesses at all stages of their development. Finom is among them. It is a platform with a wide range of financial services. They are considered irreplaceable for the development and maintenance of small businesses. Finom provides a simplified version of invoicing and accounting software integration. What’s more, Finom products also include a debit card with favorable offers for small businesses. Finom clients, with the help of a consultant, can choose the most profitable options for their business. So, for small businesses and freelancers, the platform offers the Solo Plan. It includes multi-banking and bank accounts with local IBAN. The undoubted advantage is its free cost.
Finom provides a convenient and intuitive mobile application. It supports both iOS and Android. For residents of Germany, an additional offer is available. They have access to Finom account creation during their company registration process.
What Insurance Is Needed for a Small Business
There are 12 main types of insurance requirements for small business owners.
1. General Liability Coverage
It is one of the most common types of insurance needed for small businesses. It protects against small incidents and large catastrophes that can happen to a business. This type of insurance also covers all the people with whom your company interacts in one way or another. It is considered one of the most practical forms of insurance. General liability insurance covers the expenses in such situations:
- Bodily injury that the business can cause
- Damage for owned or rented property that may occur due to natural disasters or the actions of employees
- Moral damage. For example, a damaged reputation caused by slander, wrongful eviction, privacy violations, etc.
- Medical bills that the client must pay if they are injured by your business
- Advertising injuries that may occur due to copyright violations, for which your business may be liable if various types of information are used incorrectly or unlawfully
2. Workers Compensation Insurance
This mandatory type of insurance covers the costs of ensuring the safety of employees and provides them with payments in case of unforeseen circumstances and accidents, such as:
- Medical care due to illness or injury
- Compensation for lost wages if the employee needs time to recover
- Disability benefits that cover the expenses related to the restoration of health in case of illness or injury of employees
- Funeral expenses
This type of insurance is necessary even in the case of small businesses.
3. Unemployment Insurance
It is an important type of insurance that aims to protect employees from sudden job loss (for various reasons). The tax burden, in this case, depends on the number of employees in the company. It is beneficial for small businesses with a small number of employees.
4. Commercial Property Insurance
The type of coverage is significant, especially one of its forms - homeowner’s insurance. It is aimed to protect your owned or rented property from various types of injury. Such damage includes fire, theft, natural disasters, and vandalism. The property may vary from buildings and equipment to personal property.
This type of insurance is irreplaceable for businesses with large property and physical assets. It covers various assets while also including business interruption coverage. This type of coverage can replace lost income assist with reopening costs in case of difficulties.
Each business is unique in terms of its working conditions and functioning, so companies have special offers for each client's commercial property insurance policy. They add protection for such things as valuable papers and records. With this type of insurance, it’s possible to recover vital documents and store files. Also, you can move records to protect them from damage or loss.
5. Key Person Insurance
This type of insurance protects the budget in emergency situations. It minimizes damage to the business if its owner or a manager is seriously injured or dies. With the purchase of such insurance, a small business will receive an annual payment, which will help it stay afloat.
6. Professional Liability Insurance
This type of coverage can be indispensable for small service businesses. Doctors, lawyers, and beauticians are examples. It protects against possible mistakes that may occur at the workplace of an employee. That is why professional liability insurance is also known as errors and omissions coverage. It can also cover all legal expenses for small businesses.
7. Product Liability Insurance
The type of coverage is related to all stages of the production process. It includes manufacturing, wholesaling, distributing, and product retailing. This insurance helps in the case of defective product realization that harms or injures customers.
8. Employment Practices Liability Insurance
This type of insurance covers the expenses of situations related to various kinds of discrimination. EPLI may not seem extremely suitable for business owners with a small number of employees. However, general practice shows that the absence of insurance, in this case, can be the reason for a significant amount of lost income. Entrepreneurs save about a hundred thousand dollars when such a situation occurs.
9. Data Breach Insurance
Small businesses can store the personal information of their customers. But no one can 100% guarantee that their databases will never be attacked by hackers or catch a virus. In these emergency situations, this type of insurance covers:
- Notifying impacted customers or employees
- Hiring a public relations firm
- Using credit monitoring services
10. Commercial Auto Insurance
Are you wondering what insurance is needed for a small business closely related to transportation or driving? Take a look at commercial auto insurance. This coverage can be very helpful in road accidents due to your or your employees' fault. This type of insurance works for businesses that:
- Use leased, rented, or owned company vehicles for work purposes
- Require employees to use their own cars for work purposes
11. Business Owner’s Policy (BOP)
It is an insurance package that combines all the general insurance types. BOP is quite common among small business owners. The subscription process is simplified.
12. Homeowners Insurance
It’s one of the most significant and widespread types of insurance. It protects the place of residence and property from any damage. The insurance coverage ranges from theft to destruction from natural disasters.
Key Steps to Buying Business Insurance
Here are the general steps for purchasing business insurance easily.
1. Assess the risks
Review the key parameters of your business and think about its weaknesses. Do you doubt which offer suits your company the best? Contact your agent or the National Federation of Independent Business (NFIB) for help.
2. Choose a reputable insurance agent
Approach the choice of a specialist carefully. To select the right insurance offer successfully, you will need a specialist who is interested in your problem as much as you are.
3. Take a closer look at the prices and tariffs
Different companies can offer you a similar product on completely different terms. Make sure to conduct a thorough price comparison.
4. Review the selected program every year
As the business develops, its specifics change. Consult with your specialist every year to remain covered and avoid unforeseen costs.
Nowadays, there are loads of offers, and their specifics may well be suitable for each type of business. At the entrance to the market, entrepreneurs must know their businesses well. They must also have an idea of the available offers of insurance companies. Various services work to support the business at all its stages.