Career Insurance

Types of Insurance You Will Need as an Entrepreneur

Starting a business as a new entrepreneur is a challenging endeavor. Many entrepreneurs are so focused on developing and growing their business that they forget to focus on other important aspects. In most cases, entrepreneurs have a tendency to neglect or forget all about insurance. However, insurance is a vital aspect of any business. As a matter of fact, insurance stands between business success and failure. If you don’t have the proper insurance for your business, even a simple mistake can drive you into a financial ruin.

At the same time, having proper insurances for your company protects you from various risks and liabilities that are quite common in the business world. However, what type of insurance policies does your business need, to begin with? Well, that depends on the nature of your business. That being said, here are a few types of insurance you will need as an entrepreneur, regardless of what business you’re running.

General liability insurance

General liability insurance is a policy every business needs no matter their nature. If you sell products or services to customers, you’re bound to have claims made against you sooner or later. This insurance policy protects both the owner and the company from claims, such as your products or services causing or allegedly causing bodily injury or property damage to a third party.

These types of claims can cost a lot of money to combat in court. Whether you’re guilty or not, general liability insurance can cover most, if not all of the legal expenses and costs. If you don’t have this insurance, all of the expenses will have to come out of your own pocket, and no one has that much money lying around.

Life insurance

When you cover your business protecting it is a good time to think about your family. Life insurance is usually lower on the checklist for startups, but if your family depend on your income, you shouldn’t gamble with not having them secured.

Even if you have some type of insurance, maybe it will not be enough once your business grows. For example, $500k or $100k probably wouldn’t cover all of financial difficulties your family would face after some unexpected eventualities. So, it is a good idea to search for a better life insurance now and be prepared not only for business risks but for risks that life brings as well.

Property insurance

Every business is bound to have a permanent residence sooner or later. This can also include your own home if you are running a home-based business. This insurance policy protects your business property from damage. For example, natural disasters such as fire, flood, ice, lightning and so on are sources of property damage. In addition, damage caused by theft or vandalism is also included in a property insurance policy.

Note that if your business location is in an area prone to earthquakes, you’ll have to get a separate insurance for that type of damage. Moreover, you can also include business interruption or loss of earnings into property insurance, which will help cover the loss of income if your business can’t continue to operate due to extensive damage to the property itself.

Workers compensation

Every business has employees and they are vital for your company. However, employees are also a liability when looking at things from an insurance perspective. For instance, if you don’t worry about your employees’ safety at work, they can easily sue you and the company should something bad happen to them. That’s why you need workers compensation insurance policy even if you only have a single employee working at your company.

The way this policy works is that it compensates workers for medical bills and any lost salaries while they were unable to work due to injury, for example. In exchange, your employees forfeit their right to sue you or the company. Not only that, but this policy compensates an employee’s family in case of death as well. To avoid costly lawsuits, it’s extremely important to obtain a workers’ compensation policy for any business that has employees on staff.

Car insurance

If you employ vehicles in your business, you’ll definitely need car insurance, i.e. commercial auto insurance as it’s called in the business world. Whether you employ vehicles as part of your logistic plan, use cars to make product deliveries or simply let employees use company vehicles to drive to work, you’ll need reliable car insurance.

This insurance policy protects both the vehicle and the driver from damage caused by accidents. There’s no doubt you’ll find plenty of insurers offering various types of car insurance policies. However, make sure you’re buying an insurance policy the right way and that you get the best terms for your money. Otherwise, you may end up at a loss due to having an inadequate insurance policy with insufficient coverage.

Errors and Omissions insurance

Errors and Omissions also called professional liability insurance, is an insurance policy required for entrepreneurs in the service sector. This insurance is essential for entrepreneurs who provide certain services or advice, such as lawyers, physicians, computer consultants, programmers, architects and so on. The main reason why professional liability is crucial is that it differs from general liability insurance in important ways.

For instance, let’s say you’re a programmer developing software for clients. A client sues you for delivering faulty software that caused financial losses. Now, general liability covers damage to property and injury, but it doesn’t cover financial losses caused by your product. However, that’s where professional liability insurance can be of great assistance as it covers such scenarios. That’s why you should, if you’re in the service business, make sure that aside from general liability, you also have Errors and Omissions insurance policy at your disposal.

Having proper insurance for your business is a must. If you think that avoiding insurances will help you save extra money on expenses, you’ll have a really bad time should someone make a claim against you. That’s why it’s essential to identify which insurances your business needs and obtain the right policies before something goes terribly wrong.

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Writer: David Webb

Disclaimer: All investing can potentially be risky. Investing or borrowing can lead into financial losses. All content on Bay Street Blog are solely for educational purposes. All other information are obtained from credible and authoritative references. Bay Street Blog is not responsible for any financial losses from the information provided. When investing or borrowing, always consult with an industry professional.

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