Smooth sailing is not something most business owners get to enjoy in the first few years of their dealings, and times of “storm” can be an important test of mettle to understand the company’s level of resilience. While some entrepreneurs prefer to address issues after they occur, the most knowledgeable ones are aware that being proactive and preparing for certain unpleasant situations can lessen their impact if they do indeed take place.
In this regard, obtaining insurance for aspects of your business vulnerable to lawsuits, claims, and expenses is a smart move. This article will cover key variations of small business insurance and where they are recommended.
1. Business income insurance
Business income coverage is meant to compensate you for various interruptions to your operations, but more specifically, the ones that have an immediate impact on your income. Understandably, this is more tailored to unforeseen circumstances beyond your control (external damage or theft) than something more subjective, like making a poor business decision.
Most insurance plans of this time feature a “recovery” period – a set amount of time you will be compensated for, which should be sufficient to remedy the issue and jumpstart operations once more.
If you consider getting this type of plan, you should be aware that the recovery time afforded may be disappointingly short compared to the actual time it takes to return to normalcy. Nonetheless, it is a very nice fallback option for softening blows in the short term.
2. General liability insurance
Liability insurance (often classified as public or general) exists to protect your business from lawsuits and legal action. While it won’t automatically render you innocent in court cases, it will provide a limited fund that should at least partially cover awarded claims against you.
The claims covered in this policy usually include damage to a person or damage to property. So personal damages would probably be injuries, disease, or death that your company is somewhat responsible for. As for property damage, it can be both damage to the property of other people unaffiliated with your company or damage that your property/product causes.
It’s important to note that damages and injuries to employees, their property, and company-owned assets are normally not included in the policy, as there are separate coverage types for those matters.
3. Property insurance
Commercial property insurance is a very general policy type, but will normally compensate for physical damage affecting company property. Buildings, structures, and infrastructure are the typical targets, but other asset types like hardware, digital systems, and materials could also be covered, depending on the provider.
Property insurance is not a “get out of jail free” card for companies that make mistakes or practice negligence towards their property, but rather a helping hand after events like fires, water damage, and physical attacks. The probability of an event occurring is calculated by the insurance company, and this factors into the premiums paid by the company and the awarded compensation.
4. Cyber insurance
Cyber insurance is a new service in the digital age with an ever-increasing level of demand. Since nearly every company has a digital footprint and data/systems accessible digitally, they have become juicy targets for hackers and scammers. While cyber insurance can’t stop your business from being targeted by these individuals, it can help you recover after a cyber incident.
For example, a company may become the target of an extortion attack, where its data is held hostage until a ransom is paid, or confidential information could be leaked/destroyed/modified. Some attacks cause financial ruin by hurting the reputation of the brand, and others just cause digital roadblocks that take time and substantial resources to overcome. Cyber insurance can cover many costs incurred in dealing with cyber incidents.
5. Worker compensation insurance
Many times a year, sensational news stories pop up about workers suing their current or previous employer in connection to injuries sustained on the job. Obviously, this is a nightmare for companies with high-risk professions (e.g. with the use of heavy machinery, centered around hazardous areas), but really, no industry is safe from something debilitating happening to employees.
Worker compensation insurance is designed to limit the use of false and unfounded claims by injured employees, while guaranteeing their rights to compensation in the case of defined incidents. It can be arranged with mutual agreement between employees and employers.
6. Auto insurance
Given the wide range of rules, peculiarities, and potential incidents associated with operating vehicles, it’s not surprising that they head up their own category of coverage. Though most plans focus on vehicles in company possession and use, some may also apply to personal vehicles used in a professional capacity.
Normally, auto insurance will cover damage to the car, certain contents, and injuries sustained by drivers and passengers. There is also a cutoff point for what type of vehicle an insurance company is ready to cover. For example, semi-trucks, boats, and forklifts are associated with very tangible hazards and may be therefore seen as riskier to cover.
