Industry pundits estimate that 75% of businesses across the United States are underinsured. To add to that, 40% of small businesses in America don’t have any business insurance.
Given the level of exposure to liability and risk that businesses face, having inadequate or no insurance raises the stakes incredibly high. Should any unforeseen eventuality strike, having insurance can make the difference in whether you survive or go under.
If you’re asking yourself, “What insurance do I need?” then here is a guide to several policies essential for your firm.
1. Workers Compensation Insurance
Workplace accidents can be damaging to your firm’s finances when you are unprepared for them. For context, there were 2.8 million cases of non-fatal injuries in workplaces across the United States in 2018 alone. For many of these firms, this was not an anticipated situation that might have cost them dearly.
To avoid such a fate, you need to acquire workers’ compensation insurance for your business. Workers comp is a policy that covers the injury and illness an employee suffers as a result of their work.
Even if you may be on the fence on it, the government requires you to have workers comp. Failure to that, you may be subject to hefty fines and even criminal penalties in particular cases.
When an employee eligible for workers comp suffers an injury or falls sick due to their job, the coverage will take care of their medical bills. In addition, the policy will also pay them for a portion of the wages they lose when they can’t work due to the injury or illness.
In cases where the injury or illness makes the employee not be in a position to rescue their previous job, the coverage can help them find a new one. Workers comp will pay for their training in readiness for another type of role.
2. Liability Insurance
If you run an operating business, you can inadvertently expose yourself to risks. Even if you take the utmost care to work responsibly, unforeseen issues can expose you to liability.
With this type of insurance, you can protect your firm’s assets from such risks. Liability insurance comes in three forms, i.e., general, product, and professional liability policies.
General liability insurance helps you cover your business from:
- Advertising claims (slander, libel, misappropriation among others)
- Claims from physical injuries that happen at your business location
- Clams from damaged property to another firm or individual as you do your work
Even though the law does not mandate you to carry general liability insurance, it’s wise to take out the policy.
Businesses that manufacture or sell products need product liability coverage. Such a policy protects them from any adverse impact their products can have.
For example, if someone gets injured while using your product, they can lodge a claim against you as the manufacturer. Product liability coverage helps you foot these claims, which can otherwise pose a financial burden for your firm.
When purchasing product liability insurance, you can get it as a separate policy or as an add-on to your general liability coverage.
A product liability policy affords you cover for the entire production life-cycle. Thus, if you rely on third-party manufacturers, such a policy helps settle claims arising from their mistakes on your products as well.
Professional liability insurance is another type of liability insurance policy suitable for firms that offer professional services. Such a policy, also known as errors and omissions insurance, protects your firm from malpractice, errors, omissions, and negligence claims.
In some cases, the law may require you to carry professional liability insurance. For example, some states require a doctor to hold malpractice insurance.
3. Key Person Insurance
Any firm that relies on an instrumental person faces the risk of having the operations interrupted should anything happen to such personnel. As a result, key person insurance is a policy that exists to help you mitigate that risk.
For example, if you, as the business owner, are core to running the firm, should you die or become incapacitated, the business can flounder.
Similarly, if an executive instrumental in the success of an organization dies or is incapacitated, it can mean disruption to the business. Not only that, but any clients that such an executive brought might decide to leave, taking their business with them.
When the insured key person dies or becomes incapacitated, the policy will give your business a payout to cover the losses. Some companies end up using this payout to recruit a replacement for the key person.
To determine how much coverage you need with this policy, you need to identify who your key personnel are. Assess how much each brings into the business and how long it might take you to hire and train a replacement.
A rule of thumb is to seek key person coverage for a sum eight to ten times the value of the key person’s salary.
4. Commercial Auto Insurance
Every business relies on a form of transportation for its staff and products. There are many risks that your company faces via its transportation and, thus, a commercial auto insurance policy.
A commercial auto insurance policy helps protect your firm when an employee hits a pedestrian while driving the company’s vehicle. The coverage settles the medical bills that arise out of the injured pedestrian seeking medical attention.
Similarly, when an employee is using the firm’s vehicle and hits another car, then the policy can settle any resulting damages.
If your staff use their cars to conduct their employment duties, commercial auto insurance can cover any resulting bodily injuries or property damage.
When you face a lawsuit due to issues relating to your vehicles, a commercial auto policy can cover the defense costs. The good thing is that paying your legal fees won’t reduce your liability limit.
What Insurance Do I Need?
Your business faces several risks, and operating without any insurance leaves your firm vulnerable. Should the unexpected strike, having the buffer insurance offers can mean your survival or collapse. To answer the question, “What insurance do I need?” you should examine your business operations and match your vulnerable areas to the most appropriate policies.
Amistad Insurance is a round-the-clock insurance agency that understands the power of protecting your business. Talk to us today for dependable, honest, and customer-oriented insurance services.
