4 Types of Insurance Small Business Owners Should Pursue to Avoid Risk
Risk management is anticipating the possibility that something may go awry with your business. Though you cannot prevent anything bad from happening to your business, there are some measures you can take to protect your operations. In this post, we’ll explore some of the insurance options available to business owners who want to lower their risk.
Technology has made access to electronic data easier than ever before, which also means that hackers can gain access to sensitive information with less effort.
Cyber insurance can protect your business from a cyber-attack, and the loss of important records or even funds. Years ago, cyber-attacks were only aimed at large companies, but that isn’t the case today. Most businesses use a point of sale system that stores data, and this information is a huge target for hackers.
Plus, there is more of a risk for small businesses that experience a cyber-attack, in comparison to larger companies. According to the National Cyber Security Alliance, 60 percent of small businesses close after experiencing a cyber-attack.
To combat this risk, you should consider pursuing cyber insurance, which will cover data loss, business interruptions, computer fraud, loss of transferred funds and cyber extortion in the wake of a cyber-attack. If your business is attacked, you may need to pay for computer forensics, civil damages, notification costs and credit monitoring for the victims, which could be covered by a comprehensive cyber policy.
Outsiders are not the only potential criminals to consider – employee theft is another possible risk for small business owners. Crime insurance can alleviate that risk by insuring against actions like theft, forgery and fraud amongst employees. If your business has a high number of employees that handle company funds, this is a policy you don’t want to forgo.
Even if you think that your employees are honest, you do not want to put your business in jeopardy. Although most general liability insurances don’t protect against employee theft or fraud, a crime policy can cover damages that occur if an employee steals from your business.
Professional Liability insurance
Professional Liability insurance (also called Errors and Omissions, Professional Indemnity, or Malpractice insurance) covers service-oriented businesses against perceived mistakes made when delivering a service. This policy is needed by businesses such as architects, consultants, accountants, real estate agents, medical experts, engineers, and others to cover them in the case of alleged negligence and misrepresentation claims.
Even if you’re not found guilty, litigation can be costly to your business, as it can affect the future of your business. Though most of these claims are dismissed, a client can file a lawsuit of negligence for any personal injury or monetary loss, so it is important to be prepared in case this occurs.
General Liability Insurance
General Liability (GL) insurance protects against claims that your business caused an individual harm. General Liability insurance can cover the legal fees that stem from a third-party lawsuit claiming that there was an injury to a customer. It can also cover any operational costs caused by the issue. This is a general umbrella policy that is a strong starting point in your risk management portfolio, but keep in mind that it isn’t entirely comprehensive.
To start, adopt smart business practices that limit your risks, and speak with your insurance carrier about which coverage is right for your business. General Liability coverage is a great place to start, and additional insurances should be added depending on your business’s industry and resources. Each year, you should review your business plan and consider adding additional insurance plans as your business grows.
Between the high use of technology and our litigious world, you can’t be too careful when protecting your small business against risk. Develop a comprehensive risk management plan for your business, and sleep sound at night knowing your business is covered!
Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.