Is your small business insured? Are you carrying the right kind of insurance to protect you, your company, your employees and your customers? These are the questions we faced as we were working to launch our company, OfficeDrop. We found that government-mandated insurance such as workers’ compensation go only so far in providing adequate protection. To ensure that all the sweat and money that went into building our business is adequately protected, we needed to carry other forms of insurance. After spending many days talking to various insurance advisors, we narrowed down the insurances to a handful. I hope the following guide demystifies the insurance landscape.
Workers’ Compensation Insurance
Also known as employer’s liability insurance, this insurance is mandatory in every state. By providing workers’ compensation insurance, your company can award employees monetary sums in the event that an employee is injured or disabled while on the job. Since coverage is provided in exchange for the employee’s right to take legal action against the company, you will be protected from lawsuits in the case of employee injury or death.
Business Auto Insurance
If your company owns vehicles, then all 50 states require you to carry business auto insurance. The extent of coverage will depend on who drives the vehicles and what your state requires.
If your business operates in the states of California, Hawaii, New Jersey, New York or Rhode Island, you are required to carry disability insurance. Disability insurance replaces a percentage of income for employees or business owners should they be injured and unable to earn a living themselves.
Not Legally Mandatory, But Must-Haves Nonetheless:
Property and Liability Insurance
Property and liability insurance protects your business’ assets from disasters such as fire and theft. Though you are not required to have it by law, you may own valuable assets such as furniture and expensive equipment that you cannot afford to lose. When purchasing this insurance, ensure that you are covered for the “replacement value” of these assets.
Errors and Omissions Insurance
We’re all human, and we all make mistakes. E&O insurance covers you when a client holds your company responsible for mistakes or errors made by your firm that were damaging to the client. Since OfficeDrop handles valuable customer documents, we decided to carry this insurance in case customer documents are accidentally lost or damaged. Every one of our customers is protected up to $1 million if they are adversely affected by an error. Consulting and other professional service firms are also good candidates for this insurance.
While E&O insurance protects against unintentional errors and damage, criminal liability insurance covers damages intentionally done by employees. Even with extensive background checks of each of our employees, criminal acts are sometimes completely unpredictable, so we chose to carry criminal liability.
Business Owner’s Insurance
Recommended for any business owner, business owner’s insurance protects you from personal liability in the case of litigation against your business.
Besides the above mentioned, there are many other insurance options that may greatly reduce risk in your business. Other policies include:
- Business Continuation Insurance
- Product Liability Insurance
- Key Executive Insurance
Though not all companies carry these insurance policies, they are still worth considering.
Still not sure as to what insurances to get for your business? While you may not need all of the insurance policies not mandated by law, we highly recommended that you review your business with an insurance advisor to discuss which insurance options are best for you.