Starting a business is probably one of the riskiest moves you’ll ever make.
30 percent of small businesses close shop within the first two years. 50 percent never keep their lights on long enough to celebrate the fifth anniversary, and 66 percent won’t make it past 10 years. What are the odds your business will be here for the long haul?
That said, entrepreneurship is all about risk. And the good news is there are measures you can take to manage those risks. One of these measures is purchasing business insurance.
But then, just how many types of insurance doe a business need?
In this article, we are fleshing out the various business insurance policies on the market. We will then tell you what you need.
General/Public Liability Insurance
The simple act of inviting customers to come and check out your premises is in itself a risk. If a person slips and falls or a piece of equipment falls on them while they’re in your shop, they have the legal right to sue for compensation.
As a business owner, you’re legally required to maintain a safe and healthy workplace. But this is easier said than done. Accidents do happen no matter the safety efforts you take.
This is why businesses that receive people into their premises need to purchase general or public liability insurance. This policy will compensate anyone who sustains an injury on your premises.
Product Liability Insurance
Tesla is facing a wrongful death lawsuit from a complainant who’s claiming the car’s autopilot feature caused a crash. This is a classic example of product liability.
If you’re in the business of manufacturing products, it’s possible that a design defect or malfunction can cause injury to the end-user. If this happens, nothing stops them from coming after your business for compensation. And if the issue causes injuries to lots of people, you could face a class action lawsuit.
To protect your business from such risks, buy product liability insurance.
What if your business offers a service? Maybe you’re a dentist running a dental clinic.
In this case, you need professional malpractice insurance. If you make an unintentional mistake that causes harm or loss to your client, this insurance policy will take care of their compensation.
Commercial Property Insurance
Do you run a home-based or brick and mortar business? If yes, you might be interested in commercial property insurance.
This policy will entitle you to compensation should the property that houses your business get damaged. And, by the way, cases of property damage are common. Anything from fire and burglary to a natural weather disaster can leave you counting massive losses.
But with adequate commercial insurance, your insurer will give you the monetary compensation you need to recoup the losses and get your business back up and running.
Workers Compensation Insurance
In 2017, there were about 2.8 million nonfatal injuries in private workplaces across the country.
If your business has employees, the risk of on-the-job injuries will always be there. And if an employee gets injured, they’ll likely file a compensation claim for any loss of income and treatment costs. This is where workers compensation insurance comes in handy.
What’s more, purchasing workers compensation is a legal requirement in most states. If you do business in such a state, you’ll need to buy at least the specified minimum worker’s comp coverage.
However, buying minimum coverage isn’t necessarily the right move. Depending on the nature of your business, you might want to get more coverage.
If you run an auto shop, for instance, the risk of workplace injuries is higher. Consequently, you need more coverage. This useful page can help you learn how to lower your shop worker’s comp risk.
Business Income Insurance
Poor cash flow is one of the major reasons many businesses fail.
As a startup with an unproven business model, you just don’t know when you’ll start pulling in a sustainable income. In fact, it can take years before you’re profitable. If you need proof, consider Uber and Lyft; businesses with multi-billion valuations that are yet to make a profit.
Business income insurance is your ally when you’re are not certain of your income. If you’re profitable this year but run into losses next year, the policy will cover your losses.
Bear in mind, though, that insurers might attach specific conditions to this policy. For instance, they’ll only compensate you if your losses are a result of property damage, not incompetent business decision-making.
Data Breach/Cyber Security Insurance
Welcome to the digital age!
The internet has made it easier to start and run a business, but it also presents a monster problem: cyberattacks.
If you run an online business, you’re at risk. 43 percent of cyberattacks target small businesses!
A single attack on your website can cripple your business. And if the hackers make way with customer data, your customers could sue your business for failing to protect their personal information.
While you can hire the best cybersecurity team to protect your online assets, there’s no guarantee hackers won’t penetrate. The smarter move is to purchase data breach or cybersecurity insurance.
So, How Many Types of Insurance Does Your Business Need?
How many types of insurance you need depends on the nature of your business. It could be all or most of them or just a few.
If you run a small manufacturing business, for example, there’s a chance you’ll need most of these policies. General liability insurance to protect you from outsiders who might be injured while in your facilities, product liability insurance in case defective products cause injuries to users, workers comp to step in in case of workplace injuries. Property and business income insurance are also crucial.
On the other hand, if you run a one-man online-only business from your home, it’s possible that the only insurance policies you will need are product liability and data breach insurance.
Now that you know about risk management, read how to make your business tech-focused.