Small business owners usually have a limited budget to work with. As such, it is understandable that one would view business insurance as somewhat of a luxury. However, it is important to remember that ignoring certain crucial policies will result in more costs that the amount you were trying to save. With this in mind, this article will highlight the types of insurance that small businesses should have.
Importance of Insurance to a Business
Insurance is an important element of your business success, even if you own a small business. Here’s why:
- An insurance will protect you from incidences whose resultant costs could diminish your assets or wipe out your business in totality. Picture this scenario: you run a small restaurant that accidentally catches fire and burns to the ground. You probably have a bank loan that you have to continue paying and may not be in a position to raise the money needed to start again. A business insurance will come in handy in such a situation.
- As a business owner, you are not only obliged to protect yourself and your business, but you are also responsible for protecting others. For instance, if a client falls sick after eating food from your restaurant, you will have to pay the damages. Having a liability insurance caters for such incidences without you having to dig deeper into your pocket.
- Some business activities require you to have an insurance. For instance, nurses and physiotherapists, the relevant association may mandate all its members to have a professional indemnity insurance for nurses or physiotherapy professional indemnity insurance.
Types of Insurances That Small Businesses Should Have
Business Owner’s Policy (BOP)
This is one of the popular policies among SMEs depending on the needs of your business, you can work with your insurer to customize the cover. It usually includes liability insurance, property insurance, crime insurance, vehicle coverage, and a business interruption policy. In most cases, BOP costs lesser than if you decided to take all the integrated covers individually.
Public Liability Insurance
Whether your business is home-based or you have a commercial premise, it is crucial to have a public liability insurance for business. This cover will cater for the damages and defence costs in case you, your workers, or the sold products or services cause property damage or bodily harm to a third party. The cover is applicable whether the act is just an allegation or if it actually happened.
Property Insurance
Assets such as inventory, office equipment, and the building itself – if you own it – should be protected by purchasing a property insurance. The policy will come in handy in case of unforeseen incidences such as fire, theft, or vandalism. Depending on the selected insurer and premium, you may include earnings protection in case the business is unable to run for certain reasons.
Worker’s Compensation
This form of insurance is crucial to any business, regardless of its size or sector. In fact, it is required by law at the local and national levels. The policy provides medical benefits and wage replacement to a worker if he or she is injured while at work. With these benefits, the worker gives up his civil right to sue the employer. In addition to it being required by law, the cover protects you and your business from the complicated legal process as well as the resultant costs.
Life Insurance
One of the reasons why most people work hard to establish a successful business is to give their dependents and future generations a good life. Depending on the selected premium, purchasing a life insurance means that your beneficiary with receive some cash after your demise. This policy will give you peace of mind knowing that your loved ones will be financially okay even when you are no longer there to take care of them.
Professional Indemnity Insurance
This policy is important for individuals for business proprietors in the service industry. It caters for the damages and defence costs in the event that a client places a claim for an error you made when rendering your services. It is important to note that the details of a professional indemnity insurance are different from those of a general liability insurance. To protect yourself and your business from different potential incidences, it is crucial to purchase both of these vital policies.
Car Insurance
Another crucial insurance for small businesses is a car insurance. Depending on your needs, you can choose to purchase a personal or commercial auto insurance. The good thing with this policy is that it covers all cars including van, trucks, and motorcycles. With this policy, you are covered in case of a collision resulting in property damage or bodily harm to yourself or someone else.
Cyber Liability Insurance
Even small businesses are targets for cyberattacks. Cyber liability insurance shields your small business from financial losses due to cyberattacks or data breaches. These attacks can involve stolen customer information, ransomware, or even business interruption. The costs of a breach can be devastating, including legal fees, notification to customers, and credit monitoring. Cyber liability insurance helps cover these expenses.
Ecommerce Business Insurance
Ecommerce businesses face unique risks compared to traditional brick-and-mortar stores, such as online threats. This type of insurance typically includes standard covers like public liability and property insurance but also adds specific protections tailored to the digital landscape. These additional coverages may include Cyber Liability, which safeguards against data breaches, hacking, and online fraud, as well as Product Liability, which covers claims if your products cause harm to customers. Additionally, Business Interruption coverage protects against lost income if your online store experiences a shutdown due to cyberattacks or other issues.
How to Find Affordable Insurance for Small Business
Finding affordable insurance for a small business is key for financial stability and protection. The cost of your insurance will depend on factors like your industry (e.q, a builder will pay more than a dog walker), cover level, business structure like self-employed, partnership or limited company, location, and other factors. On average, a £5 million public liability insurance policy may cost around £140 annually. For instance, Simply Business provides Public Liability coverage starting at £127 per year and Professional Indemnity, ranges from £50,000 to £5 million for £1.90 per month.
Based on experience, don’t settle for the first quote you get. Reach out to multiple insurance companies or use online comparison tools to find competitive rates such as Money Supermarket. Bundling multiple coverages like general liability and property insurance into a Business Owner’s Policy (BOP) can often lead to discounts. Choosing a higher deductible lowers your premium but means you’ll pay more out of pocket if you need to file a claim.
Furthermore, carefully assess the specific risks your business faces. Do you need cyber liability insurance? Workers’ compensation? Tailor your coverage to those needs. While it’s tempting to go for the bare minimum coverage, consider the potential financial blow of an uncovered incident. Balancing cost with coverage ensures that your business is adequately protected without overspending on unnecessary policies.
Conclusion
Running a small business is tough. Tight budgets can make insurance seem like an extra cost, not a necessity. But skipping insurance can lead to much bigger financial burden down the road. Insurance policies are meant to protect businesses and individuals from the hefty expenses that may result from various unforeseen events. Smart business owners view insurance as a strategic investment. Comprehensive coverage protects your company from unexpected expenses, safeguarding its financial health and future. Don’t let a short-term saving turn into a long-term burden.