It’s a question that puzzles most new and would-be entrepreneurs: What kinds of small business insurance does my company need?
From there, it gets more complicated as you try to navigate local requirements, industry standards, and all the different types of insurances your company can choose.
But don’t worry.
By finding a qualified small business insurance agent in Las Vegas or in your locality, you’ll get the help you need to navigate your options.
In this post, we’ll talk about some general best practices for small and growing businesses.
Keep in mind:
This blog post is intended to be helpful, and it will give you the foundational information you need to start determining what kind of insurance your business needs.
However, this isn’t legal advice.
We’re going to talk about some insurance policies that can protect against legal action – it’s basic knowledge that can help you ask better questions when you meet with an insurance agent, but it’s not a substitute for legal advice from a qualified attorney.
With that in mind, here’s the first step you should take to answer the big question:
Step 1: Contact Your Local Licensing Authority
Whether you’re starting small and selling handmade items out of your spare room, or you’re launching a new company that will hire 500 employees in your first year, you’re probably going to need a business license.
Every municipality has its own licensing and regulatory requirements, so the smartest people to ask about insurance requirements in your locality are the people that issue licenses there.
This isn’t general information.
By talking to the business licensing office in the locality where your company is going to operate, you’ll get direct, specific answers on what you’re required to have to meet legal standards.
Step 2: Even If They’re Not Required, Consider These Types if Insurance for Small Business
Depending on your industry and your local requirements, you may need to have one or more of these routine business insurances.
Even if they’re not required for compliance, though, ask your insurance agent whether they might be a smart decision for your company.
General Liability Insurance
Most businesses, both small and large, choose to purchase general liability insurance regardless of regulatory requirements.
General liability serves as sort of a blanket policy, covering a variety of costs like punitive damages from personal injuries, property damage, libel and slander, legal fees, and any legal judgments against your company.
Basically, if someone sues you for something, your general liability insurance is likely to cover it.
Property insurance is great for home-based businesses, entrepreneurs working out of shared office space, and larger companies with their own premises.
It covers assets like furniture, office equipment, and fixtures.
As a home-based business, your homeowners insurance policy often doesn’t cover business related losses, though you may be able to purchase a rider.
General liability policies sometimes have provisions to cover these company property losses, too, so ask your insurance agent whether or not you need more coverage.
Professional Liability Insurance
Professional liability insurance, also called errors and omissions insurance, is often required for businesses that give certain types of advice or medical treatment.
Medical malpractice insurance, for example, is a type of professional liability insurance.
This insurance protects you from damages that come from your errors, such as malpractice or negligence suits.
If your business model involves giving advice – especially legal, financial, business, or medical advice – you should consider adding professional liability insurance to your coverage.
For manufacturers, distributors, and retailers of physical products, product insurance protects your business against financial losses if your product is defective and causes harm or injury.
Depending on your business type and your policy, this protection may also be built into your professional liability insurance.
Check with your insurance agent if you’re not sure.
Step 3: Look Into Industry-Specific Insurance
Some industries are inherently more high risk. Consider, for example, the risks involved in working on a construction site.
You may want insurance that covers you in the event of workplace accidents, pays your legal fees for certain kinds of lawsuits, or specifically addresses the possibility of injury to spectators.
Restaurants that serve alcohol might look into insurance that covers liquor liabilities.
Those in the entertainment industry can purchase industry-specific insurance that covers things like wardrobe damages and unexpected production issues.
There are a multitude of options available for all kinds of businesses, and insurance coverage is never one-size-fits-all.
Talk to your insurance agent about your specific challenges, concerns, and budget, and together you can find a level of coverage that’s just right for your risk level.
While you’re doing that, though, think of step 4:
Step 4: Consider Your Growth Plan
As your small business grows larger, your risk level changes – and that means your insurance coverage should change, too.
Running a business is fast-paced and exciting!
That’s part of what makes it so rewarding to be an entrepreneur, but it also makes it very easy to overlook your changing insurance needs.
Even if you’re just starting out in your home at a low volume, if you plan to reinvest your earnings to grow your company, consider purchasing insurance coverage for your small business to grow into.
Too often, small business owners don’t even think about insurance until it’s too late.
As your customer base gradually expands, so does your risk level.
If you think your small business can’t afford insurance right now, do you think it can afford a lawsuit or a major loss of assets?
Something like a blown hard drive or water damage to a critical piece of equipment might derail your business before it even has a chance to gain momentum.
Look at the big picture when you’re shopping for small business insurance, because being underinsured can be a disastrous mistake.