What Kind of Small Business Insurance Do I Need?

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If you're a small to mid-size business owner you may have just realized that you need business insurance. Buying commercial insurance may have been the last thing you thought you'd need to do but you found out last minute that you're required to have it in place in order to begin work. Or, maybe you have business insurance and want to explore your other options. It's always a good idea to get business insurance quotes and compare them in order to see what your options are before deciding which insurer is right for you.

Most small businesses need general liability insurance, business owners policy and commercial auto. You should also explore health insurance for small business owners, which may be required depending on the size of your company. If you have employees, you will have to meet federal law requirements: You will need to carry workers compensation, unemployment and disability insurance.

On a local level, each state has different requirements for business insurance. Contact your local chamber of commerce to find out what your requirements are or be paired up with a trusted agent, who will guide you through all the steps you need to take.

General Liability Insurance for Small Business

A general liability policy will cover you for bodily injury, property damage and data loss. You will be protected against lawsuits and liabilities associated with your product or service. You'll also be protected against advertising injury and contract liability.

Most types of businesses need to have general liability insurance. Here's a list of the most common ones: construction companies, electricians, cleaning companies, landscaping companies, yoga studios, gyms, nail salons and restaurants.

Some businesses carry more risk than others. The bigger your company gets, the more prone you are to being involved in an accident. A simple trip-and-fall accident can become catastrophic if you don't have general liability insurance for your business. In some professions it's even common to require employees to carry their own general liability insurance as well as having one in place for the company at large.

How Much Is Liability Insurance for a Small Business?

The best general liability insurance for a small business may or may not come cheap. You'll want to compare business insurance quotes to find the best deal. The average annual cost is less than $800 or less than $40 a month. The amount you pay may be much higher or much lower depending on how much risk is involved in the type of business you run. If you have a very small-scale operation or work out of your own home and have no employees, you can expect to pay much less.

It's very expensive to not be insured with liability insurance for business and get sued. According to Insurance Journal, the average paid liability claim is $15,000 so it's better to have it and be protected than be without and get sued.

Sometimes the requirement for liability insurance is written in a lease and it's something the business owner didn't anticipate. Chances are that your business property landlord or employer will tell you ahead of time verbally or in writing if it's required of you to carry your own general liability insurance. However, sometimes people learn after their first day that they can't begin working or opening up shop without general liability insurance.

Most Common Professions to Require General Liability Insurance:

  • Contractors
  • IT
  • Landscapers
  • Hair stylists
  • Personal trainers
  • Instructors
  • Attorneys
  • Doctors
  • Teachers
  • Counselors
  • Therapists
  • Occupational therapists
  • Insurance agents
  • Brokers
  • Accountants
  • Real Estate Agents
  • Photographers
  • Spa owners

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What Is Business Owner's Policy (BOP) for Small Business?

A BOP bundles coverages together to customize a policy. Usually, a BOP includes general liability, business property insurance and commercial interruption insurance. You can only buy a BOP if your company employs fewer than 100 employees, grosses less than $1,000,000 a year in revenue and is not considered a high-risk business.

A BOP will not only protect you against the types of lawsuits associated with your industry, but it will also cover damages to a client's personal property.

You can choose limits on BOP insurance, but don't go lower than the value of the business personal property or else you will be at a loss if a catastrophic event takes place.

You can expand the coverage terms of your BOP by buying endorsements. For instance, liquor liability insurance is common for a restaurant or cafe. Cyber liability insurance is becoming a staple for many companies. Cyber attacks are the reality of today's business environment, and cyber liability insurance is increasingly being bought to protect sensitive data. Cyber attacks are not covered by general liability insurance.

How Much Does a Business Owner's Policy Cost?

It's important to shop around and compare quotes for business insurance. You can then decide which coverages and prices fit your budget and needs. The average cost of a BOP is about $1200 a month or $100 a month. Rates are determined according to various factors, which include risk and location.

Health Insurance for Small Business Owners

Health insurance for small business owners is a huge conundrum. Is health insurance required for small business owners or isn't it? It all gets so confusing. But no, business owners do not need to offer health insurance if they have fewer than 50 full-time employees. Even when the Affordable Care Act (ACA) was in place, health insurance for small business owners was not required if they had 50 full-time employees or less.

This year (2019), employers with 51 or more full-time employees must provide group health insurance coverage to their employees or else they face a penalty.

Even when providing health insurance to employees isn't required, it's wise to find out how much you can save with a health insurance tax credit, which is guaranteed. With the tax credit and the retention of top talent, health insurance may not be such a big cost after all.

There are many pros and cons to offering your full-time employees health insurance when it's not required but first, get your hands on some numbers before making any financial assumptions: get business insurance quotes first.

Workers Comp Insurance for Small Business

Texas is the only state where workers' compensation insurance is not required by law, but even there most employers elect to have it as a coverage for their employees. The coverage requirements vary from state to state so it's important for you to learn the specific laws of your state.

Workers compensation is available to help protect businesses and employees. Coverage protects your business financially by protecting you from lawsuits. It also provides injured employees with medical care and lost wages so they can get back on their feet and return to work. In the long run, turnaround is more expensive than retaining talent.

Do I Need Commercial Auto Insurance?

Should you list the car under your personal auto coverage and never think twice about business auto insurance? It's best to find out how your insurance company would handle a claim if you were to have an accident in that vehicle while using it for business-related reasons. Or worse yet, what if an employee had an accident while using it for work-related reasons?

If you use your vehicle for personal and business reasons, many insurers will allow you to cover the car on your personal insurance policy with a small business-use surcharge but some insurers will not cover you at all if you have an accident driving the car for business purposes. If you crash your truck while delivering three trees and shrubbery to a client's home, you may or may not be covered.

You need to first establish a good relationship with a commercial business insurance agent who will guide you through the myriad details before you make any decisions. Compare business insurance quotes and you'll be connected with one of our partner agents in your area.

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