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Startup Essentials Series: Do You Need Small Business Insurance?

EDITOR’S NOTE: This is the fourth installation of a multi-post series dealing with decisions and tasks startup businesses face when getting off the ground. You can read the first article here, the second one here and the third one here.  

If you own a home, you probably have homeowners insurance. If you own a car, you almost certainly have auto insurance. So, it stands to reason that if you’re a small business, you should probably have small business insurance, right?

Yes … sort of.

“Small business insurance” isn’t really so much a specific type of insurance as it is a package of different products that most small businesses need. Some companies (think Nationwide, State Farm and Progressive) offer these products as bundles, but business owners should be familiar with the different components so they know exactly what they need and be able to comparison shop, too.

Here’s a look at the different types of insurance you may need as a small business owner.

Small Business Insurance Products

Liability Insurance: General liability insurance is a basic coverage type for many types of insurance – not just business. For small businesses, however, this kind of insurance will cover things such as personal, bodily or advertising injury, medical expenses, damage to a third party’s property and legal defense costs. A couple examples of when you’ll need this kind of insurance include if you ever access another party’s equipment, or you use third-party locations to do business.

Property Insurance: Property insurance is fairly straightforward: This product covers damages or outright losses to not just your business’ building, but also the things in it – copiers, computers, even raw materials. In some cases, property insurance may also cover other expenses such as cleanup.

Business Income Insurance: When you think of disaster striking, you typically think of the things covered under property insurance – say, a flood damages some of your equipment, and insurance pays for that. But what happens between then and the point where your operations are back up to snuff? Your company isn’t producing widgets, which means you’re not bringing in any sales, which means you’re not generating any income. Business income insurance, however, can actually compensate you for any income that you lose as a result of a disaster, as well as for a temporary operating location.

Workers Compensation Insurance: Workers compensation insurance is mandatory in most states for all but the smallest of businesses, based on number of employees. And it does exactly what you would expect it would do: If an employee is injured on the job, the insurance will pay out for medical expenses and even some wages lost as a result of the injury.

Commercial Automotive Insurance: This type of insurance obviously makes sense for people who either use their own cars heavily for business purposes, or for companies that own business vehicles. Like regular automotive insurance, you’ll be able to select from a wide array of coverages, from basic liability (for any damages you may cause) to comprehensive insurance that will cover repairs and even replacing your vehicle in the event of a crash or other issue.

Complicating matters is that these are just some of the insurance products you may need as a small business – not the only ones. While some of these policies may be mandatory, they can also protect your business from going under in the case of disaster.

While we aren’t insurance pros, McManamon & Co. does offer numerous business consulting services to small- and mid-size businesses that can help you ensure your company stays afloat. Call us at 440.892.9088 or contact us online to get a helping hand.

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