Do You Really Need Business Insurance?

Chances are you have had a, “Thank goodness for insurance!” moment at some point in your life. A tree falls on your roof. You lose a tooth in a sporting injury. You rear-end someone at a red-light. There are many opportunities for understanding why having insurance in our personal lives is important. The same holds true for our businesses.

Owning a business is inherently risky. There are a million different scenarios that can result in claims and lawsuits against your business and you as the owner. This is why every business, even a self-employed venture, will want to review and obtain the right coverage.

Securing the right coverage begins by understanding what your options are. To help you in this regard, here are five of the most common forms of business insurance and recommendations for when it makes sense to purchase them:

General Liability Insurance
General liability insurance covers claims of injury and property damages involving your business. Though most typically associated with physical injury, coverage can also include cases of intangible damages such as slander or false advertisements.

When to purchase: Most businesses can benefit from obtaining general liability insurance as it helps to cover unexpected costs when the business is liable for damages. This may include legal fees as well as medical expenses and repairs. Without liability insurance, you would have to pay for these types of expenses out of pocket. A virtual business will also benefit from having general liability insurance, as the wrong social media post, article, or advertisement shared online can lead to claims representing slander or libel.

Workers’ Compensation
Workers’ compensation (workers’ comp) insurance provides coverage for injuries sustained by an employee while on the job. This form of protection provides financial support to help cover associated costs such as medical expenses, lost wages from time off, and death benefits. Having this type of insurance also helps to protect against having employees sue the business for damages.

When to purchase: Each state has their own workers’ compensation requirements. This may include having to obtain workers’ comp insurance when you are self-employed and there are no other employees working for you. Regardless of the differences in requirements between states, having workers’ compensation insurance offers peace of mind when it comes to covering unexpected costs that can result from accidents. For independent contractors, having this type of insurance can also serve to validate that you are not an employee of a client in the eyes of the IRS and U.S. Department of Labor.

Professional Liability Insurance
Also known as Errors and Omission (E&O) insurance, professional liability insurance covers claims of negligence when providing services. This can include malpractice, mistakes, and performance failures. In layman terms, a customer can sue if the services you provide fail to meet expectations. For example, if an accountant fails to file your tax forms on time, there is a basis for a negligence lawsuit.

When to purchase: Professional liability insurance is a smart move for anyone providing professional services, as cases of negligence are often not covered under general liability. There are many different types of businesses that provide professional services and can benefit from this type of coverage. This includes lawyers, engineers, doctors, accountants, wedding planners and consultants.

Data Breach Insurance
Data breach insurance protects your company when private information is stolen or otherwise violated, either in paper-form or electronically. Private information can mean many different things such as customer’s personal information, patient medical records, and investor data. As we continue to take advantage of cloud-based data storage and transfers, cyber-attacks are becoming a more common form of data breach.

When to purchase: The recent breach of Equifax data files has many people on edge about the security of their information. If your business stores private information, having data breach insurance is a good idea, especially as the number of cyber-attacks increases.

Business Owner’s Policy
A Business Owner’s Policy (BOP) is a bundled insurance plan meant to provide an all-in-one coverage approach. This typically includes commercial property, general liability, and business interruption insurance.

When to Purchase: BOP insurance is appropriate for companies that require several different types of business insurance. The benefit is that bundling the different coverages together will result in premium savings.

One final and important note, if you run a home-based business, talk to your current home-owner’s or renter’s insurance provider. Personal insurance plans do not typically cover business related claims. As a result, you may need to expand your coverage to ensure your business is protected.

For more information on the above options as well as other types of insurance, check out The Hartford’s Frequently Asked Questions.


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