For just a few hundred dollars a month, you can protect yourself against a myriad of things that could go wrong in day-to-day business operations. What happens if a customer trips and falls, if you make a mistake and get sued, or if an earthquake hits? Any one of these mishaps could happen to a well-functioning business and take it to bankruptcy overnight unless you are properly insured.
Should You Get Insurance?
The first question to ask yourself is whether or not you have an asset worth protecting. If you are just starting up a new business with annual revenue under $50,000, then it probably won’t make sense for you to get business insurance. On the other hand, if your business would be valued at $50,000 or more, then it makes a lot of sense to pay a few hundred dollars a month to protect your business against unforeseen circumstances.
What Kind of Insurance Should You Get?
It depends entirely on your business, your customers and the industry you are in. For example, in the medical or legal community, malpractice insurance is just about mandatory. Bookkeepers may or may not carry malpractice insurance, depending on the kinds of clients they serve. Do some research into the kinds of insurance people in your business tend to purchase. Look into the kinds of lawsuits and/or disasters that can happen to a business of your type. Then ask yourself if you think the risk is sufficiently high to deserve protection.
A Brief Rundown of Different Insurance Types
There are a few common types of insurance:
* A General Liability policy will shield your business from lawsuits stemming from people who get injured at your place of business, or from using your product.
* Business Interruption insurance will help protect you against the cost of unforeseen circumstances. If your warehouse burns down, property insurance will cover the cost of the building, but you will need business interruption insurance to cover the cost of the few months when you are not in business.
* Professional Liability and/or Malpractice insurance is common in the services industry. Basically, this type of insurance protects you against lawsuits stemming from mistakes. If you are an accountant and you prepare a company’s books incorrectly and they get hit with a penalty from the IRS, they may sue your company for the costs. This type of insurance can help protect against that.
* Worker’s Compensation insurance protects you against injury claims from your employees. It’s mandatory in most states.
These are just a few of the most common types of insurance. There are many more “niche” kinds of insurance plans from which you can choose depending on the type of business you run. Always read the fine print, what qualifies a claim and exclusions (when a claim won’t be qualified).
