Any time you start a business, you’re opening yourself up to certain risks—but there are steps you can take to manage and mitigate those risks. Foremost is purchasing the correct business insurance. This may sound simple, but once you realize just how many options there are, and how many insurance types and carriers you have to choose from, it can become a complicated process. In other words, you may know you need insurance coverage, but struggle to identify which kind.
Start with some basics: use the questions below to conduct a self-inventory, which can help you more accurately identify your insurance needs.
6 KEY QUESTIONS ABOUT YOUR SMALL BUSINESS INSURANCE NEEDS
1. DO YOU HAVE EMPLOYEES?
If you’re what they call a “solopreneur”—someone who works alone, without any employees—then your insurance needs with respect to employees (there aren’t any) are fairly simple. However, once you start adding personnel, you will need to start thinking about obtaining Workers Compensation insurance and Employer’s Liability Insurance, which covers the cost of employee accidents and injuries. Employment Practices Liability Insurance should also be considered, as it can protect you from other types of employee claims against your company, including harassment or discrimination.
2. DO YOU HAVE YOUR OWN SPACE?
A lot of businesses start in basements or garages—but if you own or lease office space, it’s probably wise to have Commercial Property Insurance, which can protect you against issues occurring in the building. And if you are running your business out of your home, a standard homeowner’s policy may not cover your business equipment or supplies. A separate policy may be needed, on top of your homeowner’s coverage.
3. DO YOU TAKE PAYMENTS VIA CREDIT CARDS?
If you accept credit card payments—either online or in your retail location—or handle sensitive information relating to your customers, then you run the risk of your customers’ payment information being hacked. With Cyber Liability Insurance, you can protect yourself from the ramifications of these types of cybercrimes.
4. DO YOU PERFORM PROFESSIONAL SERVICES?
If you’re providing clients with professional services, consider professional errors and omissions coverage. The purpose of this coverage is to protect your business against claims that a service you provided caused your client to suffer harm due to errors or because you failed to perform a particular service (omissions). The specifics are industry-dependent, and it’s important to carefully review the terms of your policy to make sure it fits your business.
5. DO YOU HAVE CASH ON HAND TO HANDLE A DISASTER?
For younger companies, in particular, there may not be a lot of cash on hand—which means that liability exposure can really sap your resources and put your company in trouble. This can be true even when you have a decent insurance policy in place. For a small additional investment, however, you can augment your existing coverage with an added umbrella insurance policy. This can provide you with the extra coverage you need to make sure you’re not cash-depleted if something catastrophic happens.
6. DO YOU OR YOUR EMPLOYEES DRIVE FOR WORK?
It’s often assumed that a personal auto policy will protect you against any accidents that happen when you’re driving for work—but that may not be the case. Check your auto policy to see if it has an exclusion for business use—many policies do! And if you think you need extra protection, look into obtaining Commercial Auto Insurance.
MAKE THE BEST DECISIONS ABOUT YOUR BUSINESS INSURANCE
There are obviously a lot of factors to consider as you think about your business insurance needs—but simply reflecting on these questions can help you narrow things down.
It also helps to meet with someone who is highly experienced in dealing with business insurance needs. McLaurin Law fits that description, and we’d love to talk with you more about helping you design a program for your small business insurance needs. Reach out to us today to talk further!
Jason McLaurin is a founding member of McLaurin Law. He has over a decade of experience representing clients at trial, arbitration, and mediation in matters concerning insurance policyholder recovery disputes, complex commercial litigation, and catastrophic personal injury claims. He also represents businesses as outside general counsel for clients in a variety of industries including construction, oil and gas, maritime, technology, and professional services. He is licensed and handles matters in both Texas and Louisiana.