It has taken you countless days and long nights to create to build your small business, so one extra step to protect your hard work shouldn’t be second guessed. And of course, the easiest and most effective way to protect your business is to ensure you have the right business insurance policy in place. Whether or not you can afford it, do you really want an accident to put a stop to everything you’ve worked so hard to build? We’ve highlighted 5 insurance mistakes small business owners make. We hope none of our readers fall into any of these categories…
Business Owners Relying on Your Homeowner’s Insurance Policy
This mistake is typically made by business owners who run some part of their business out of their home. Check out your homeowners insurance policy and review with a magnifying glass as traditional policies exclude any business operations including structures and business equipment. Even worse, an injury sustained by a customer or vendor on your property is also excluded from coverage.
The following types of business insurance coverage are fairly important to carry as a small business owner working from home:
- Business Personal Property Insurance – coverage for your business contents including equipment, furniture, inventory, etc.
- On- Premise Liability and Off-Premise Liability – coverage for third-party injuries sustained by customers, vendors, etc. both on and off site.
- Errors and Omissions Coverage – sometimes referred to as professional liability, this coverage protects your you, as a small business owner, and/or employees against claims made by clients for inadequate work or negligent actions.
A significant amount of small businesses that work with other businesses are often required to carry certain insurance policies such as general liability insurance, workers compensation, commercial umbrella, etc. To verify, companies may ask you for a certificate of liability insurance, which is a single page outline of policy coverage and limits.
Your Business Needs Loss of Income Coverage
Loss of Income, sometimes referred to as business interruption coverage, is what keeps your business going after an unfortunate disaster occurs. Commonly, business owners believe that commercial insurance is meant to protect their valuable property. While this is true, Loss of Income coverage protects your bank account when disaster strikes and leaves your small business closed for weeks or sometimes months.
You’re mistaken if you think Loss of Income is something on it’s own. While you may purchase a stand-alone Loss of Income policy, most business owners policies offer Loss of Income as an option to be added.
Life Insurance for Small Business Owners
Can your small business keep going if you retired? Most likely not. A sensitive, but extremely important issue often ignored is life insurance. Generally speaking, small business owners have a special set of skills unique to their business and become the business themselves. If you answered no to the first question, ask yourself what would happen to your family if you pass away. That simple question can open a Pandora’s Box of other very important questions and scenarios to think of. Buying life insurance is essential in the event of misfortune to the business owner and should be taken very seriously by every successful small business owner.
Business Owners Disability
Besides the death of a small business owner, disability can be even more devastating. More people are financially devastated by disability than they are by death. Disability is one major reason people file for bankruptcy and/or home foreclosures. It is a human tendency to not think of worst case scenario, but the fact is, the chance exists for all people and business owners alike.
According to the U.S. Census Bureau, there were nearly 40 million Americans with a disability in 2015, representing 12.6% of the civilian non-institutionalized population. Below is a breakdown by state.
Disability insurance is necessary for every small business owner in the United States. While Social Security may seem like an option in the case of disability, 36% of those who apply for Social Security disability benefits actually receive them.
Business Owners Pay Too Much For Insurance
A scary and very common mistake that many small business owners make is buying insurance that may not be specific to their unique business. Take a look at your business insurance policy and notice included and expensive coverage that may not be necessary for your specific business.
It is vital for a small business owner to quote their small business insurance from an agent that focuses on commercial insurance. Taking a few minutes of time to speak to an agent about your specific business operations, needs and maybe requirements will help to design a package for your specific small business. It’s also worth mentioning that as years go by, things change, and the same can be said about the insurance industry.