When you open a business, you expose yourself to legal liability and risk. One of the most overlooked parts of opening a business is purchasing the correct insurance to cover and protect it. While there are many great insurance options for small businesses, it can be daunting to figure out which you actually need for your business. Here are six common small business policies worth considering:
General Liability coverage
General liability insurance (GL) provides essential protection for your business. Sometimes referred to as small business or commercial liability insurance, it protects against bodily injury claims, damage to the property, and personal injury.
Who should purchase? Those who interact with clients in person, use advertising, utilize third-party locations for business, or are required to have this coverage for a project.
What’s the cost? Pricing is a factor of industry, location, business size, and the degree of coverage you need; Hiscox reports that an IT consultant who makes $100,000 annually might pay $350.
An important note: for small business owners who have hired staff, GL usually will not cover worker’s compensation (if an employee injures themselves on the job), nor will it cover Personally Identifiable Information (PII); so additional insurance should be considered for employees.
If you’re even considering hiring employees, you should get quotes for Worker’s Compensation insurance (which typically can be appended directly to an existing policy). This will cover your business if one of your employees is injured or dies on the job/as a result of their work.
Who should purchase? Those with part-time and/or full-time employees. Even employees who are a “low risk” for work-related injuries could slip and fall or develop carpal tunnel syndrome. While these seem minor, they can be costly to a business; you could even be liable to cover lost wages. The National Safety Council reports that the average cost of a worker’s comp claim is $40,000.
What’s the cost? The degree of risk must be considered for a quote from an insurance provider; Insureon reports that a low/medium risk business might pay $47 monthly.
Business Owners Policy
A business owners policy (BOP) is usually added to GL insurance to ensure the business equipment and property are covered as well. This can often be customized to include vehicle liability insurance, office insurance (for fire or business interruption), and/or electronic data loss.
Who should purchase? Those who own a piece of property or valuable business equipment required for work.
What’s the cost? It varies widely based on industry, location, and business size; Hiscox quotes a Business Consultant in MA at approximately $760 annually.
Professional Liability Insurance
With more people consulting now than ever before, professional liability insurance has become increasingly popular. Sometimes referred to as Errors and Omissions Insurance (E & O), it protects against the risk of professional services. In other words, it shields the business if you’re sued by a client for making a mistake, and will cover costs to defend yourself or reach a settlement.
Who should purchase? Those who act as consultants, advisors, etc.; anyone who provides professional advice or service to clients.
What’s the cost? It varies based on industry, location, company size, and the amount of coverage you need. An IT consultant in California, for example, is projected to pay $441 annually for professional liability insurance.
Property insurance, sometimes called commercial property insurance, simply covers a business’ real estate assets and its contents.
Who should purchase? Those with a physical location for their business (whether leased or owned), or who have products, inventory, or valuable business assets that are crucial to running the business.
What’s the cost? Coverage is expansive, ranging from small standard policies targeting specific risks/locations to much larger plans that include natural disaster coverage.
Cyber Security Insurance
Cybersecurity is a rapidly evolving field, as serious breaches have reached an all-time high. Cyber attacks could drain all valuable data, leaving one unable to perform operations or access any systems. They may also be liable for any personal health or identifying information stolen by hackers. Cybersecurity insurance protects businesses against these computer-related crimes, losses, or simply if a laptop containing important data goes missing.
Who should purchase? Those who maintain any sensitive and/or personal information and those who accept credit cards or other forms of digital payments.
If you have any questions or need assistance with small business insurance, please contact LRZ Consulting.