If you own a small business, you’re probably aware that it’s important to have insurance. But what policies, exactly, are required? The answer can vary from industry to industry and region to region, and determining the right mix of coverage can be complex.
Here are some of the most common policies purchased by small businesses, and tips on when they might apply to yours:
BOP: General Liability Insurance + Commercial Property Insurance
A Business Owner’s Policy, or BOP, combines two important insurance policies - general liability and commercial property - in one easy, affordable package. Your business likely qualifies for a BOP if you have less than 100 employees and less than $1 million in revenue.
A BOP provides broad protection from claims of third party injury and covers damage to your own property, too. The general liability coverage is important if you have a physical location that is visited by clients or other non-employees. If you own a store, for example, a customer could slip and fall on a wet floor and bring suit against you. The property insurance covers your assets, like computers or inventory, as well as the actual building in cases of theft, vandalism, or natural disaster.
Workers Compensation Insurance
Workers Compensation insurance is important to have if you employ people - even just one or two! In fact, in most states, it’s legally required.
This type of insurance protects both sides - the employer and the employee. It offers reimbursement for lost wages and medical expenses when an employee falls sick or gets injured while working. And in accepting this coverage, the employee waives their right to sue the business.
Accidents can happen in any work environment, whether it’s an office or a construction site. In an office employees can suffer from repetitive stress injuries, while in a restaurant servers may be at risk for slipping when a drink is spilled on the floor. Workers compensation insurance is an essential element to protecting the health and safety of your employees, as well as your business assets.
Errors & Omissions (E&O) Insurance
E&O insurance protects your business from professional mistakes. For example, if you’re a consultant and you advise a client to adopt a business process that ultimately loses them money, they could sue you. Or, if you’re a lawyer who provides poor counsel to a client and they lose their case, they could bring suit against you.
E&O insurance covers legal costs and related settlements in these situations. If you offer any type of service to clients for a fee, you should strongly consider purchasing E&O coverage. Even if you hire the most experienced professionals in your field, mistakes can happen. And even if you’re not found at fault, the cost of defending yourself from a lawsuit alone can bankrupt a small business.
Directors & Officers (D&O) Insurance
D&O insurance is typically associated with large, publicly traded companies, but it’s important for some small businesses, too.
It protects the directors and officers of your company from being personally sued for decisions they make on the job, and is increasingly essential to recruiting high quality executives. Common D&O claims include wrongful termination, bankruptcy, and employee discrimination.
It’s easy to see why executives and board members would be concerned about facing such claims. With D&O insurance, you protect their assets and give them the freedom to make business-critical decisions without worrying about personal liability.
Cyber insurance is increasingly important for businesses of all sizes - small businesses aren’t immune to risks associated with hackers and data breaches. In fact, according to First Data, 90 percent of data breaches affect small businesses. If you store any customer data online, this is one to consider.
A data breach can cost your business big time. It can interrupt business operations, harm your reputation, and bring on lawsuits. Additionally, you’re legally required to notify all affected parties, which can get expensive. With cyber insurance, you can recoup some or all of those costs.
Maxime Rieman is Director of Product Marketing at CoverWallet. Educating and assisting shoppers about financial products has been Rieman's focus, which led her to joining CoverWallet, a startup dedicated to simplifying insurance for small businesses.
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