Small business insurance is just as essential to your company as a phone number or email address.
The questions “When should I buy insurance and what types should I get?” are rarely going to be at the top of an entrepreneur’s to-do list. They’re also unlikely to be at the front of your mind when you’re about to put the shingle outside your door for the first time – though that’s exactly when you need to start thinking about them.
That’s because small business insurance is just as essential to your company as a phone number or email address. It protects your business if disaster strikes, and disasters come in all shapes and sizes: it could be a flood or storm which destroys your offices, a fire that damages your inventory, or being sued.
Liability insurance is just as important as property insurance, even for the smallest company. It protects your firm against unexpected events that occur as part of your everyday business, whether that is a customer tripping in your office and breaking their foot or being sued for misleading advertising.
General liability insurance protects you against lawsuits; your insurer will pay for an attorney to defend you and for any costs involved in settling your case. It can be bought either as part of your business owner’s insurance package or as a separate product.
When you’re deciding about whether to buy it as part of a package or on its own, you should think about what the realistic likelihood is of your company getting sued. This will depend on the type of business you are in: you are less likely to face a legal claim if you run a homemade jewelry-making firm than if your business is importing and selling sports nutritional supplements, for example.
The risk to your business will also depend on where it is located. We live in a litigious society, but courts in some states are known for awarding more in damages to people who sue for personal injury than others.
But you also should think about buying a separate general liability insurance policy if:
• You regularly visit a client’s premises, or if they visit yours;
• You have access to your customer’s equipment (for example, if you’re an IT consultant who works on a client company’s servers);
• You use other places for doing business (like an auditorium for a training event or a conference center for a trade show);
• You write or speak about a client’s business – the policy includes coverage against libel and slander claims.
In some cases, you might have no choice but to buy a separate policy, because many companies require contractors to have general liability coverage before they will do business with them.
You shouldn’t think your business is too small to be sued – plenty of one person firms get dragged into the courts to defend lawsuits. It’s wrong to believe that your homeowners’ insurance will cover you if you work from home – in most cases it won’t. Also, don’t think that you’re immune from liability claims because you set your business up as an LLC. It’s always wise to get additional protection.
Finally, don’t think that it’s too expensive for your little firm to buy. Premiums for annual coverage can start as low as a couple of hundred bucks, running up to a couple of thousand – a small price to pay if it covers you against a claim that may cost hundreds of thousands, or even millions, of dollars.