Do You Have the Right Types of Business Insurance?
When crunch time comes at budget time and you have to cut some expenses, it may be tempting to look at those business insurance premiums and wonder if you really need the protection they provide.
It’s possible that you’re covered for some situations that you’ll never encounter. That’s why it’s a good idea to go over your policies with your financial advisor periodically. He or she can help you evaluate your needs and your coverage. This is especially important if you’ve never had any professional advice in this area.
But it’s also possible that you’re at risk for some unexpected situations.
The Small Business Administration (SBA) warns against the false confidence that some feel because of their business structure. LLCs and corporations protect your personal assets from business liabilities, but “…relying on business structure alone to protect your assets is not a substitute for liability insurance,” according to the SBA.
So general liability insurance — which protects you from the legal entanglements caused by accidents, injuries, and claims of negligence – is a must.
Is your company involved with the manufacture, wholesale, distribution, and/or retail sale of products? If one of those products causes an injury because of a defect, product liability insurance can help you avoid financial loss.
Similarly, professional liability insurance protects individuals and companies that provide services and are sued for malpractice, negligence, and other errors. This is mandatory for some professions in some states. In fact, many states have other insurance requirements. You can find a directory of state contacts here.
If your company’s property suffers damage or other loss from fire, vandalism, severe weather, etc., a commercial property insurance policy can protect you. The SBA strongly suggests that you consult with an insurance expert because of the rather broad definition of the word “property.”
If you have an office in your home, you should consider home-based business insurance, since your homeowners’ insurance policy may not compensate your for business-related losses.
Companies that employ individuals have additional insurance requirements, including:
- Workers’ Compensation
- Unemployment Insurance Tax, and
- Disability Insurance (only in a handful of states and Puerto Rico).
The National Association of Insurance Advisors hosts an educational site about business insurance issues called Insure U. If you’re in the formative stages of a company or you simply want more information about options and requirements, this is a good place to start.
Your financial advisor, though, is your best resource here. He or she knows you and your company, and can help you determine what you need to do to be protected.