Do I Need Insurance for My Business?
Dan Levenson February 07, 2020
Starting a business comes with many questions. One of the first you will ask yourself is “Do I need insurance?” Many people will investigate options themselves relying on internet searches and things their friends said. I know talking to an insurance agent isn’t as fun as exploring the internet but when it comes to business and commercial insurance, understanding how to protect yourself is essential to success. Join us as we tackle the loaded question: Do I need insurance for my business?
It is rare for business owners to voluntarily procure a fully comprehensive insurance package that protects their business and employees from the many risks a new business may face. The topic of insurance usually comes up when a business owner is about to enter a business contract, which can be for their services, to lease office space, or to conduct business in a certain area that requires a certificate of insurance. This is the moment when business owners ask, “Do I need insurance for my business for reasons other than outside requirements?”
The answer is yes! Insurance is never a bad investment. Insurance will protect your business, property, and employees from the chaotic world we live in But you need to make sure you’re getting the right coverage. Even if you think your business is providing the same service as others might be, business operations from one to the next can be as unique as a fingerprint. The number of employees, the amount of property you own, and the location of your operations all play a part in how insurance can be optimized to protect you.
The first thing to look at, as with any endeavor, is your state’s laws. There may be laws that require businesses to maintain an active insurance policy always. Depending on the state, businesses with employees are required to have workers’ compensation. Workers’ compensation provides coverage for employees injured on the job and protects the business owner against a lawsuit from those injuries. Whether it’s required by law or not, if you are planning on hiring employees you should investigate the cost of workers compensation. Other examples of a state law requiring insurance are
- Commercial auto for your business-owned vehicle,
- Professional liability insurance for certain professional services and
- Liquor liability insurance if you sell alcohol
The type of entity you are also factors into what kind of insurance you need. Companies that are registered as LLCs have different requirements than a company that is an S-Corp or C-Corp or a business that is considered a sole proprietorship. For example, it is required for an S-Corp to have workers’ compensation even if you do not have any employees but a single member LLC with no employees doesn’t need a policy. There are several other regulations that you may encounter be sure to check your specific state’s department of labor and Department of Insurance for requirements more details.
In the natural flow of doing business, you will likely run into someone who asks for your certificate of insurance. It could be a landlord, a contractor, a business partner or a government entity. To do business with them, you will need to provide a copy of your certificate of insurance that lists all of your active insurance coverages. If you plan on doing business, you will need insurance to have a certificate of insurance. Almost every business contract has an insurance requirement and those requirements will dictate what policies you need to get. Policies you should consider are Commercial General Liability, Umbrella Liability, Commercial Auto, Errors and Omissions also called Professional liability, Third-Party Fidelity Crime Bond, Surety Bonds, D&O, EPLI and more.
Running a business based on a product or service you provide can open you up to all sorts of claims and lawsuits. You have no control over what someone alleges you may or may not have done. The only thing you can do is make sure you’re protected if that day comes, so insurance should be a top priority for your new or existing businesses. If you find yourself asking if you need insurance, you are on the right path to good business ownership and success. When shopping for insurance, be sure that everything is explained to you. If it’s not, then maybe you are not speaking to the right people. Insurance isn’t complicated when you know what you are looking for. Contact a licensed insurance agent today and start protecting your dream.