To all our small business owners: you’ve gotta have insurance

You know you should have insurance, but you don’t know why. You’re running a small business and you have at least ten other things on the brain besides what type of risk mitigation measures you need to put in place. Besides, the cost of the monthly premium alone could be put to much better use in the rest of the budget. Any of these sound familiar?

Small business insurance is a necessity for conducting protected business activities. It may sound hyperbolic, but not having it could cause your not just your whole business to collapse, but also bankrupt you in the process. This scary reality can be avoided by choosing to invest in the correct coverage for your needs. The federal Small Business Administration (SBA) states that a good rule of thumb is to “insure against things that you could not pay for on your own.”

Here’s a quick rundown of the types of policies you could choose for your small business.

General Liability
According to insurance provider Hartford Fire Insurance Co, general liability insurance “helps protect your business from liability in the form of property damage claims, bodily injury claims, and/or personal and advertising injury claims that could put your business’s assets at risk.“ Consider general liability insurance as the first line of defense that can cover many different types of claims, but lacks some nuances that you may discover you need for your specific business.

Product Liability
Product liability is insurance that covers a business that manufactures or distributes a product. This type of coverage can be useful from individuals who make their own cosmetics to sell on Etsy or merely sells on the behalf of others. If a product caused harm to someone who purchased it, product liability would cover you.

Professional Liability
Professional liability is for the business that provides a specific service instead of a good. Whether you’re a financial consultant or a certified masseuse, if you don’t have professional liability insurance, you could be put at financial risk if a customer who used your service sues you. This type of coverage insures you against the financial loss of malpractice, negligence, and errors that a customer can receive if they purchased services from you.

Home-Based Business
52 percent of all businesses in the United States are run from home. It makes sense that a specific subset of insurance was developed for individuals with this particular need area. This type of insurance is added as a rider on top of a homeowner policy that adds specific language to cover equipment and if third-party (i.e. not the homeowner) becomes injured while at the home based business.

These are the four general areas of applicable small business insurance. Of course, there are many more types that you may need like workers compensation or auto liability. The price of all these coverage areas can be affected by the type of industry your business is in, as well as the number employees that work for you.

By now, the dollar signs may be ticking up in your head. Take a deep breath. The best way to deal with the cost of a good policy is to decrease your risk areas as much as possible and consider the amount of deductible you’d be willing to pay. The SBA recommends assessing your liability annually before renewing policies, and that’s a great way to start this process for the first time. Get with a licensed agent before making any policy decisions and rest assured, the cost of coverage will be small in comparison to the cost of trying to cover a catastrophic event out of pocket.

I’m not an insurance underwriter/broker and this story is not to substitute consultation with a real-life trained insurance agent. With that in mind, go find your nearest small business insurance broker or contact your Chamber of Commerce for assistance.