Do I Need Small Business Insurance?

So I have car insurance, home-owners insurance, health insurance and now I need to decide whether to add small business insurance on top of that. So I started to look into insurance options online. I found out that the term “small business” insurance is actually a catch all phrase to describe a dozen different insurance products. I realized that before I could even begin to decide whether I wanted to purchase insurance and what company I go with I first need to know what I might be getting and what these products cover.

General Liability

The most basic type of insurance is general liability or umbrella liability insurance which covers legal hassles due to claims of negligence. General Liability insurance helps protect against penalties that result from bodily injury or property damage, medical expenses, the cost of defending lawsuits, and settlement bonds or judgments required during an appeal procedure.


Product Liability

If your small business produces or sells a product the business becomes directly liable for its safety. The unfortunate reality is that every product is capable of personal injury or property damage. Additionally, every service rendered may be capable of personal injury or property damage. Businesses are considered liable for negligence, breach of an express or implied warranty, defective products, and defective warnings or instructions.



Home-Based Business Insurance

Homeowner’s insurance policies do not generally cover home-based business losses although at times this can be added to your existing policy. Home-based business insurance generally covers the business property, professional liability, personal and advertising injury, loss of business data, crime and theft, and disability.



Internet Business Insurance

Currently one of the biggest growth areas for small businesses is Web-based businesses. Insurance products have been created to cover the unique challenges of online businesses. These products cover liability for damage done by hackers and viruses, lawsuits resulting from meta tag abuse, banner advertising, or electronic copyright infringement.


Criminal Insurance

No matter how tight security is in your workplace, theft and malicious damage are always possibilities. While the dangers associated with hacking, vandalism, and general theft are obvious, employee embezzlement is more common than most business owners think. Criminal insurance and employee bonds can provide protection against losses in most criminal areas.



Business Interruption Insurance

If you are like most small business owners you could not survive financially without income from your business. Business Interruption insurance covers losses during natural disasters, fires, and other catastrophes that may cause the operation to shut down for a significant amount of time.


Malpractice Insurance

If your small business offers a professional service you may be required to obtain malpractice insurance. This insurance will cover the cost of payments as the result of bodily injury or property damage, medical expenses, the cost of defending lawsuits, investigations and settlements, and bonds or judgments required during an appeal procedure.

Many corporate insurance providers will offer all of the above insurance options. It is essential to consider the unique circumstances of your business before purchasing any insurance product. You should also read the fine print of any insurance agreement. There are usually a list of restrictions or instances where your insurance will not cover your costs. Also be aware of the cost of being over insured. The last thing a struggling small business needs is to pay their hard earned profits to an insurance company will little chance of seeing a return on that investment.