Every entrepreneur takes huge risks when opening up their business. Risk-taking is part of the game. As a general rule, the bigger the risk, the bigger the profits. Some businesses are exposed to more risks than others, while others have very thin margins of profits. These types of business owners could be one lawsuit or catastrophic natural event away from declaring bankruptcy.
Unfortunately, small businesses are at the forefront of most bankruptcies due to liability. In fact, in the United States, at least 36% of small businesses are involved in one litigation at any time. As we all know, when someone sues you it can be a very expensive process not only because of the risk of you losing but also because hiring a proper defense lawyer can be very expensive. Hence, why it is important for all businesses to have proper insurance coverage to protect them against all dangers. Having said that here are 6 essential insurance types a business should have.
This type of insurance also goes by the name of errors and omissions insurance (E&O) and is targeted towards protecting professionals such as engineers, nurses, and doctors from negligence claims resulting in harm due to mistakes or failure to perform. This type of insurance is usually associated with the above-mentioned professionals because they face the highest risks and potential for the most damages.
However, any professional like a bookkeeper or wedding photographer can have liability claims against them for things like clerical errors resulting in lost revenue and or damages to a client’s photos making a photographer prone to getting sued. If your business involves rendering professional services then this type of insurance is a must-have.
If you have a business that often rents properties to organize events such as parties and weddings, then you need to protect yourself from third party property damage or bodily injury claims that may occur at the event you are hosting, as explained by the experts behind Netsurance. These professionals often deal specifically with special event insurance coverage that is tailored based on the type of event and its duration. For example, if you are hosting an office party chances are lower for someone to cause property damage or bodily injury, this type of lower risk would be reflected in the insurance premium price. These sorts of limits ensure that you have the best coverage for the money spent.
All businesses that have employees should also have workers’ compensation insurance. This type of insurance will cover medical expenses, disability, and death in the case that an employee gets hurt while working for your business. Workers’ compensation insurance claims are some of the most common for businesses because even low-risk work can cause an employee to get hurt or develop medical conditions such as carpal tunnel syndrome.
Most businesses are operating out of a physical location, thus having property insurance is a must, no matter if they own or lease their space. Property insurance covers things like equipment, inventory, and furniture in the event of a storm, fire, or theft. Owners should understand that most property insurances do not cover acts of god situations such as earthquakes and floods if a geographic area is likely to be exposed to these events.
If you are in the business of manufacturing, then product liability insurance will help cover you in the event that a product causes damages to your seller or their property and you get sued as a result of that damage. Coverage is usually available for tailoring based on product type and risk. For example, a small children’s toy may have much higher risks than a coffee table.
Businesses that have their own fleet of vehicles to be used for things such as deliveries need to fully insure their vehicle against liability in the case that an accident may occur. Liability coverage protects if you are held liable for the injury or death to people and damage to property. This type of insurance also covers all medical bills, rehabilitation, and loss of income as a result of a disability suffered by a third-party due to a vehicular accident. It is also important to have comprehensive vehicle coverage which protects you from damages to your own vehicle due to incidents like theft, vandalism, and fire.
Businesses should protect themselves against all liabilities, the above-mentioned insurance policies are some of the most common ones that can protect the majority of businesses from the most common risk factors. This ensures that they do not go bankrupt from being sued. Insurance premiums are relatively a small expense for the worst-case scenario, therefore, most businesses should not cheap out by not having them at all.