Owning a business can be extremely rewarding. You’ve put your blood, sweat, and tears into creating a successful revenue stream, and you might even be creating jobs for your local community.
You’re undoubtedly very busy building your empire, but have you stopped to consider how your business would fare in the event of a financial emergency? The average insurance claim for property damage or customer injury is $30,000; do you have that amount readily available to cover the cost of an unexpected incident?
From general liability to property insurance, let’s take a look at which key policies and coverage you might need to protect yourself, and your employees, from any challenges that you may face.
General Liability Insurance
If you have any interaction with the general public, general liability insurance should be on your list for essential protection policies. General liability (also sometimes referred to as commercial general liability insurance) may protect your business by covering the cost resulting from any third-party accidents, property damage, or bodily injury.
If any member of the public is injured on your property, or a representative of your company causes damage to a property or person outside of your building, you may be liable for all repair and medical costs. Settlement costs for third party injury on a business’s property routinely reach six figure sums, and general liability insurance could protect your business from having to cover this out of pocket.
Workers Compensation Insurance
If you have employees, workers compensation insurance is required by law in most states. Workers compensation insurance covers medical costs and lost wages for your employees in the event that they are injured in the workplace, or as a result of their employment.
According to the National Council on Compensation Insurances (NCCI), the average cost of a workers compensation claim is $41,003. The average claim cost increases in workplaces where machinery presents the risk of serious injury or amputation.
By taking out workers compensation insurance, you’re not only potentially protecting your business from having to pay significant costs out of pocket; you’re also giving your staff the peace of mind that if they’re injured as a result of their employment, they will not be financially impacted in a negative way.
Credit Insurance
A less common, but nonetheless helpful insurance for business owners to consider is credit insurance, sometimes referred to as ‘trade credit insurance’. Credit insurance protects a business in the event that a customer does not pay for products or services that they have purchased, due to bankruptcy, insolvency, or simply a refusal to settle the invoice.
Many companies opt to invoice for their products and services, as opposed to requiring upfront payment, and an estimated one in ten invoices becomes delinquent. Depending on the insurance policy purchased, in the event that an invoice goes unpaid, the insurer will pay out a percentage of the invoice amount—generally 75% to 95% of the full amount.
Business Interruption Insurance
Some events that could cause damage to your business, such as floods and earthquakes, may not be covered under your existing insurance policies, especially if your business is located in an area prone to natural disaster. By selecting a policy add-on like business interruption insurance, you can give your business the best chance at surviving any unexpected damaging events, such as natural disasters.
Covid-19 served as a stark reminder that disaster can strike at any time. According to a recent study, more than 160,000 US businesses have closed during the Covid-19 pandemic, with 60% of those expected to never reopen. Coronavirus interrupted, disrupted, diminished, and destroyed millions of businesses worldwide and continues to do so.
Business interruption insurance may cover your business in the event of government-mandated shutdowns, although some policies will specifically exclude virus events, so it’s important to read them thoroughly before signing on.
Property Insurance
Insuring the property that your business operates out of is one of the most important policies you should consider as a business owner. Your business likely contains many valuable or hard-to-replace items, including machinery, furniture, product inventory, and fully equipped workstations.
Only approximately 40% of small businesses in the US are profitable, so the cost to replace or repair any damaged or stolen items in your building (or the building itself) could be financially devastating for the average small business owner.
Ensuring that you have the correct property insurance allows you to be confident that you won't be blindsided by significant out-of-pocket costs, in the event that your business or its contents are damaged.
Insurance Coverage In Conclusion
With so many insurance policies on the market, deciding which option is right for you can be overwhelming.
By considering these key policies, and making sure that you do your research to find the best available policies for your circumstances. You can rest easy knowing that your business and your financial interests are protected from whatever challenges you may face with comprehensive coverage.
