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What are the benefits of small business insurance?
There are lots of different types of small business insurance available. My company carries general liability insurance, but I'm wondering if I should get product liability and/or business inturruption insurance as well? Are these services worth the cost?
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4 Answers
Business Insurance is critical for business. From a macro standpoint, insurance greases the wheels of commerce. Without insurance, lenders would not be taking additional risk with all sorts of property loans. What bank would loan a business money with the risk of the collateral evaporating in a fire or lost to theft? Not many landlords would allow you to occupy their facilities without insurance. Some customers may not engage you without evidence of insurance. State and local authorities will not issue licenses without evidence of insurance.
At the individual business level, the benefits of insurance are numerous;
1. Peace of mind is one of the greatest benefits. I know of a shop owner who slept at his business while he was awaiting the installation of an alarm system. With insurance he could transfer the risk of loss to his insurance carrier.
2. Insurance carriers and agents can provide a loss prevention services to reduce the risk of a loss to your business.
3. Insurance pays for the continuation of your expenses in the event your business is shut down due to a covered loss.
4. Insurance protects the personal assets of a sole proprietor, since the business exposes the individual to any liability losses.
5. Insurance replaces your property and business assets in the event of a loss.
6. Insurance companies defend you in the event of a lawsuit alleging injury or property damage.
7. For many business types, insurance is required by state licensing authorities.
8. Insurance allows you to purchase equipment, inventory, and get property loans.
9. Insurance may be required by your customers.
10. Insurance protects your livelihood, your business, and your bottom line.
What type of business are you in? Your customers may require you (at least indirectly) to carry product liability or "excess liability."
Having appropriate insurance was/is an important differentiator for our brand new business. We can have certificates of insurance in the hands of a new customer within 24 hours or so. We got a significant number of jobs that we might not otherwise have gotten because we had insurance that our competition did not.
You should "opt in" to Workers' compensation insurance even if the law does not require you to insure yourself as the "owner" because if you are hurt on the job, your regular health insurance will not cover you.
Business interruption insurance would be a good idea if you could afford it but it is really a case of cost/benefit. Where is your business and what are the likely risks and what would a likely "interruption" cost you? If it would put you out of business, then probably you need this insurance. If you have a good Disaster Recovery plan (and don't forget the "little" disasters--you will be better able to evaluate the insurance question.
we have written many pieces on this topic, so if you could be more specific we'll post our answer addressing it. Some of the reasons you would want insurance coverage for your business include:
General Commercial Crime Prevention
* Ensure that all exterior doors have deadbolt locks with a minimum one inch bolt into the strike plate.
* Secure exposed exterior door hinge pins to prevent their removal.
* Protect all grade floor glass through the use of bars, metal screens or burglary resistant glazing materials.
* Install a burglar alarm system which is monitored offsite. We recommend that the system be certified by Underwriters Laboratories of Canada (ULC).
* Continually check for unsafe work conditions and practices, and take prompt corrective action.
* Provide a complement of serviced, multi-purpose fire extinguishers in your premises and instruct all staff in their use.
http://www.thinkinsure.ca/index.php
Contractors' Loss Prevention Tips
* Focus on pre-job and pre-task planning. The principle of planning the work and working the plan should be followed.
* All tools and equipment should be kept in a locked area at all times when not in use.
* All tools should be stamped with an identification number to assist in recovery. Tools should be painted with bright, easily recognizable colours to ease in their identification.
* Any onsite storage of materials should be in a secure storage area. Where the materials are considered a high target, they should be kept inside a building in a locked area or brought to the site only when they are needed.
* Warning signs should be posted limiting access and indicating the safety equipment required to gain entry.
* All electrical cords that pass through pedestrian areas should be secured so that tripping is avoided.
http://www.thinkinsure.ca/index.php
One type of insurance not mention is for errors and omissions. Primarily for service providers, it can protect you if a client is harmed by a critical error or omission in your service. For instance, notaries frequently carry errors and omissions insurance.
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