We all know you and your business must have protection through insurance. What happens if you can’t operate your business due to circumstances beyond your control? Are you ready if you or your business is sued (as discussed in our previous article)? You must have the right business insurance policies in place. You need to work with an insurance agent to be sure you not only have the common policies, but there are several other insurance policies business owners don’t know they need.
In my Starting a Business Series, I wrote an article titled 7 Types of Business Insurance Startups Must Have. In that blog post, I defined and described the most common liability policies that will protect you if you are sued. I urge you to read the article for information on the following insurance policies:
Most likely, one or several of those insurances will protect you and your assets if you are sued. They cover accidents, malpractice, theft, loss, and more. However, I propose that you need other types of insurance coverage to mitigate risks you could incur in business. Although other types of coverage may not cover you like a General Liability or a Workman’s Comp plan would, they can be used to help cover some of your costs if lawsuits or business interruptions occur.
First of all, if you have a product-based business, then Product Liability Insurance could help you. Essentially, this insurance covers lawsuits from customers who claim they have been injured by a product you produced, manufactured, or sold. Maybe you sell coffee, and it burned a customer’s mouth. Perhaps you manufacture seat belts. What if a clipping mechanism in one of those seat belts malfunctioned in a car wreck and led to a driver’s death? Even if customers do not follow product directions or heed warning labels, they can still sue you if your product causes them injury. Therefore, I highly recommend asking your insurance agent if it’s right for your business.
Most likely, you are unfamiliar with this next type of insurance. Simply, Director’s and Officer’s Insurance protects business executives from lawsuits resulting from actions they took. Maybe an employee files a lawsuit against one of your executives for wrongful termination. Perhaps a different employee files a sexual harassment lawsuit against one of your business officers. Whether the lawsuits are founded or not, your business and its officers require the protection Director’s and Officer’s Insurance can provide.
What if you don’t work in a brick and mortar building? Instead, you operate a home-based business. In that case, you wouldn’t have a General Liability Policy or a Property Policy. You would purchase a Business Owner’s Policy that covers your home property, your general liability, and your products. Taken as a whole, the BOP policy is one of the most popular and most inclusive policies available for home-based businesses, and a good insurance agent can help you customize the BOP policy to meet your specific needs.
Similarly, if you operate your business from a home office and you have a little bit of traffic on site, you may want to purchase a Home Office Policy. Not quite as inclusive or holistic as a BOP policy, the home office policy can cover some of your liabilities if accidents occur on your property. However, this policy does not cover natural disasters like a Business Owner’s Policy would.
Also available to the home-based business is a Business Pursuits Endorsement that goes on a Homeowner’s Insurance Policy. Probably the least protective of the home-based business insurances, the insurance rider may work best for a service style business that doesn’t have a lot of foot traffic or equipment.
Yet, if you take out no other policy as a home-based business owner, at least consider a personal umbrella policy. Typically sold in million dollar increments, this policy places additional coverage limits over your home and your auto. Again, this policy won’t protect your assets like other plans can, but it will help cover some costs in cases of accidents or lawsuits.
Another insurance you may want to consider is Business Interruption Insurance. Sometimes offered as a stand-alone policy and sometimes offered as an insurance rider to other policies, this type of insurance can offer you financial coverage should natural disasters occur that interrupt your business operations. If those disasters occur, this insurance provides you with the income to help keep the company going and the employees paid. However, other insurance policies (like Property Insurance) will cover damages to and rebuilding of any property attached to your business.
Oftentimes, if business owners protect themselves with Business Interruption, General Liability, and Property Insurances, they think they have all of their interests protected. However, flood insurance is coverage people don’t think they need until they actually need it. Just remember, flood insurance covers you against water rising up out of the ground, not from water raining down. For instance, let’s say a tornado blows the roof off of your building and rain pours into your house. Homeowner’s or Business Owner’s Policies would cover the rain flowing into your home or business. Yet, if the sewers backed up and water flooded from the street into your building, flood insurance would cover that. If rain causes the rivers to swell and leave their boundaries, then flood insurance is what you need, not BOP or homeowner’s policies.
Once you get out of what’s called the property and casualty insurances, you get down into the personal insurance lines. In my opinion, every business owner should have a Life Insurance Policy. Obviously, you want to take out a policy – whole life or term life – on yourself as a business owner. However, you may also consider offering life insurance policies to key employees or to all employees.
Additionally, I think Disability Insurance is vital for business owners. If employees depend upon you for their livelihoods and you get sick or injured, what happens to your employees? What happens to you? Not only will Disability Insurance or Business Overhead Disability provide you with an income if you become unable to work, it will also provide income to keep employees paid or to bring in an associate to help keep the office operating.
Finally, you need health insurance. Whether or not you provide it to your employees is your decision, but at least procure it for yourself. It’s a “necessary evil,” if you will. Even if you seem immune to illness, no one is immune to accidents or other people’s negligence. Therefore, don’t leave your health to chance. Don’t let one hospital visit rob you of all of your business’s profits. Take out health insurance on yourself to protect your business as much as you protect yourself.
Although this list of insurance policies business owners don’t know they need is not exhaustive, I hope it helps you. You may need one of them, or you may need all of them. No matter what, contact your insurance agent, and make sure you have the right coverages in place. Don’t leave your business assets unprotected. Protect your business from lawsuits, theft, accidents, disabilities, and risk.