There are more than 7 million small businesses in the United States. Although the federal government defines a small business as any concern with fewer than 500 employees, most are far smaller. According to Small Business Administration data, about 52% of America's small businesses are home-based and just 2% have between 5 and 20 employees. The vast majority, 90%, of all small businesses are sole-proprietorships. What most of them have in common, besides an entrepreneurial spirit, is a woeful lack of business insurance coverage. If you're thinking of becoming one of the more than half million small businesses that open each year, give your new enterprise a head start at survival with a solid small business insurance plan. Here's what you need to know.
Your Small Business Insurance Portfolio
Every situation is different and there is no one-size-fits-everyone small business insurance portfolio, but the basic products you should consider based on your specific circumstances include:
- Property Damage and Loss Insurance. Even if you're working from home, you should consider a separate policy that covers your business. Your homeowners insurance policy may be inadequate or even contain exclusions and limitations on coverage for loss or damages to your business furniture, equipment such as computers, machinery supplies and inventory.
- General Business Liability Insurance. This protects you against claims of negligence made against you or an employee that causes financial or physical harm to a client, visitor or vendor. It also covers damages you cause to someone's else property.
- Product Liability Insurance. This protects you against claims that a product you manufacture sickened or injured someone.
- Errors & Omissions Insurance. This is essentially malpractice insurance that protects you against lawsuits arising from claims of professional negligence, ineptitude, lapses in professional judgment and similar mistakes (intentional or unintentional) made by you, an employee, subcontractor or agent that cause a client financial loss. It covers your legal defense fees and any judgments against you up to the limits of your policy. There are a E&O (also called Professional Liability) policies that can be designed for your specific areas of expertise.
All of the above are optional. The following are mandatory.
- Workers Compensation Insurance. If you employ others, you are required by law to carry this to protect them from on-the-job injuries. Laws regarding workers comp vary by state.
- Auto Insurance. If you use your personal vehicle or a fleet of commercial vehicles to conduct business, you need to have auto insurance that provides coverage accidents and injuries that happen in the course of driving while conducting that business.
Make a practice of reviewing your business insurance policies as your business grows, adding products and coverage to protect you and your assets from exposure to risk as needed. You can get small business insurance quotes online on this site.
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