How Does Small Business Insurance Work?

Owning or operating a small business can be rewarding and exciting, but it also requires diligence and responsibility. Unlike larger competitors and peers, your organization may have stringent financial limits that make accidents or errors particularly threatening. While employers with more resources might be able to recover from certain incidents, you must toe a finer line to ensure that your company’s future is not jeopardized.  

Given the stakes riding on even daily operations and tasks, your business must implement adequate risk management and loss control practices, such as purchasing and maintaining a comprehensive insurance portfolio. 

What Is Small Business Insurance? 
As its name suggests, small business insurance refers to coverage that protects small organizations from losses associated with common risks and exposures. Like general business insurance, small business insurance does not always refer to a single policy but rather may consist of a package of policies. After compiling a suitable small business insurance portfolio, your organization may receive critical financial assistance in response to incidents that might otherwise result in high out-of-pocket costs. 

What Types of Insurance Do Small Businesses Need? 
Although all small businesses should prioritize maintaining some form of an insurance portfolio, specific coverage needs and circumstances may vary. Still, in most cases, organizations across most industries may benefit from the following: 

• Commercial property insurance—As a small business, your resources are limited, and even slight damage to essential property could be devastating. Fortunately, this coverage, also known as business property insurance, can financially protect the following: 
  • Buildings 
  • Electronic devices 
  • Equipment 
  • Inventory 
  • Furniture 
• Outdoor features (e.g., signage and landscaping) 
• General liability insurance—Incidents for which you are liable could have significant financial consequences. If you are at fault for the losses of a third party, such as a guest or customer, this coverage can help pay for the following: 
  • Medical bills 
  • Lost or reduced income 
  • Property damage 
  • Legal costs 
• Business income insurance—Small companies may struggle to overcome interruptions in their operations caused by covered events. Fortunately, in such situations, this coverage, also known as business interruption insurance, may provide financial assistance for the following costs: 
  • Rent/mortgage payments 
  • Lost income 
  • Employee wages 
  • Tax/loan payments 
• Workers’ compensation insurance—Regardless of size or sector, your organization bears responsibility for employees’ health and wellness. If one of your workers is injured on the job or develops a work-related illness, this coverage, which is legally required for most employers, can help pay for the following: 
  • Medical services 
  • Lost or reduced wages 
  • Vocational rehabilitation 
  • Disability/death benefits 
  • Legal costs 
• Errors and omissions insurance—If a client or customer accuses your small business of providing services that were inadequate, incomplete, negligent or late, this coverage can insulate you from losses by assisting with legal costs, such as the following: 
  • Defense/representation 
  • Settlements 
  • Judgments 

Depending on your organization’s circumstances, the aforementioned coverages may still leave gaps in your insurance portfolio. With that in mind, your business should conduct a comprehensive analysis of its operations to determine additional insurance needs. For example, companies that store sensitive data or own motor vehicles should acquire cyber liability and commercial auto policies, respectively. Similarly, any small business with employees should maintain employment practices liability coverage. 

Get the Right Coverage 
We’re here to help. With over 50 years of combined experience, the agents at James V. Funaro Agency have the knowledge and experience to help you secure your small business’s finances and future. We will work with you to assess your risks and exposures, determine your coverage needs and build an optimal insurance portfolio. Contact us today to get started.  

This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.