As a small business owner, you inherently assume responsibility for the well-being of your employees and customers. Regardless of your industry, your business activities will affect those around you.
Employees and customers can both be considered stakeholders in your business. While this can be beneficial, it can also lead to costly, serious issues. Having business insurance protects your business financially from some of the associated potential consequences of operation.
In this post, we'll discuss why business insurance is essential. We'll also list five scenarios that would require an update to your business insurance.
Why Business Insurance is Important
There are many reasons why small business insurance is crucial to the continued success of your company. The financial consequences associated with potential business interruptions can be dire. In some cases, mishaps can wipe out your business's assets.
Business insurance provides your company with protection against many things. If customers or employees experience bodily injury within your business’ control, insurance has you covered. Or, if some natural disaster causes property damage, business insurance has your back as well.
It goes beyond this, though. In addition to protection against yourself and your assets, as a small business owner, you also need to protect others. For example, if you offer food services and a customer falls sick after ingesting something you served, you're liable. Likewise, if you have drivers and one strikes another vehicle, you'll need to pay for any damages caused.
Finally, there's another reason why business insurance is vital. Different types of business insurance may be required for various business activities. Some contracts require coverage as part of the terms. Also, there are other insurance types, like worker’s compensation, that are required for almost all businesses in the United States.
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When To Update Your Business Insurance Policies
Even if you have business insurance, there will be times when policies need to be reviewed and updated. These large changes in your business may seem routine but can have extensive ramifications if incidents occur.
Ensuring your business insurance policies are kept up to date and accurate is crucial. Not doing so can easily cause your small business to be liable if issues do arise. Below are five of the most common events that would trigger a need to update business insurance policies.
1. When Hiring Employees
Have you recently hired new employees? If so, it's likely they need to be included in your comprehensive worker’s compensation policy. Most states require that employers extend their workers comp coverage to all employees. However, the official laws can vary, dependent on the state in which you do business.
New York state has some of the most stringent hiring laws. Workers compensation coverage is required as soon as you hire your first employee.
The state of Georgia has slightly more lax laws. Workers compensation coverage is required when you have at least three employees.
Texas has far less extensive insurance requirements, and doesn't require employers to obtain workers compensation policies at all.
Ultimately, it’s important to check your state’s laws to ensure your small business’ compliance with hiring regulations.
2. When You Land A Big Client
Those in service industries may experience a growth in insurance needs when landing that “big fish” client. One great example of this is a small business specializing in IT network installations. They may secure a big contract to install networking for a new big-box bank opening up in their small town.
A term in the contract might be the requirement of purchasing something called a fidelity bond. This bond acts as insurance, securing a guarantee that if an employee steals from the bank, the bank will be reimbursed.
3. When You Switch Locations
Sometimes your small startup business outgrows its humble home office beginnings. If you go from working from home into an office lease, more things change than just your address. For instance, you may need to obtain additional business liability insurance.
When moving into rented space, the property owner may require the purchase of a specific amount of general liability insurance coverage. Commercial property insurance may need to be considered as well.
When you move, ensure the policies you select have your new leased address on it. Also, make sure the coverage spans larger-cost items that you purchase after moving locations.
4. When You Add New Service Options
Adding new services to your small business’s repertoire is an additional medium to serve your customers. However, it's also another channel for potential legal issues down the road.
Irritated clients and customers can easily allege that your business has wronged them. Whether claiming professional errors, incomplete craft, or unfulfilled orders, complaints do happen. Ensuring your company has a defense against these claims is crucial and can get expensive if left unchecked.
If your livelihood is dependent on your professional advice or services, you likely will have already obtained professional liability insurance. This type of policy covers legal costs if sued over flawed services. Adding new services will usually require an update to this policy.
5. When You Start Driving More
Does your business own and operate vehicles? If so, you're probably well aware of commercial auto insurance policies. However, did you know that you may need commercial policies for your personal vehicles as well?
Personal auto insurance policies might not protect you if you end up in an accident when driving for work. This includes tasks such as business errands or travel to and from meetings.
Check with your insurance agents to determine what your policy lacks in coverage. They'll inform you if you should purchase commercial coverage for your private vehicle.
How To Get Business Insurance
Business insurance can be obtained by doing ample online searches and performing due diligence. However, it is a far better option to speak with those in your industry. Ask for recommendations on who they use and who they suggest.
This goes double for industries like food service or construction. Here, having ample and good-quality insurance coverage is incredibly crucial.
Small business insurance rates will vary. Finding a broker that specializes in your industry means you'll be far more likely to obtain appropriate coverage at competitive prices. In addition, brokers specializing in your space will understand your business niche. They'll also understand the details and nuances of what is necessary for a comprehensive insurance policy.