Do I Need Insurance for My Small Business?
Many small business owners assume their own personal insurance policies provide enough protection for their business. This is very often not the case. A little research is all that is needed to make sure that you are protected on both personal and professional fronts and save a lot of problems down the road.
Very often a small business owner will assume that their homeowner’s policy will cover them in the event of a business problem. Actually a homeowner’s policy usually only covers incidents that happen on, or in, personal property, i.e., the home. If a customer of a small business makes a claim against the business, a homeowner’s policy will most likely not provide any protection, thus leaving the business owner personally liable. This could mean paying huge amounts of money out-of-pocket. It could even result in having to close the business!
Additionally, one should not assume that their homeowner’s policy will cover the value of business assets held within the home. A policy will spell out how much money will be paid out for contents in the event of a loss. Normally this would cover standard home contents, such as furniture. It may be enough to cover any special equipment used in a business, or any valuable documents that are related to the business.
Along the same line, a personal automobile policy may not cover a vehicle involved in a business-related accident. Most policies specifically ask if a vehicle is used for business purposes. If a policy is started before a business begins, and the policy provider is under the impression the vehicle is used only for personal reasons, a business-related accident could leave the policy holder liable for any damage to their vehicle and injuries, as well as those of anyone else involved in the accident. The insurance company may have a legal right to refuse coverage of any damages. This will be specifically spelled out in the policy. However, many people don’t actually read their full policy, and may assume they are covered no matter what. This is not the case.
Finally, any business must be covered for their liability. A liability is something that one owes money or some other obligation on. For example, if a contractor builds a sidewalk at a customer’s house, and the customer gets injured on the sidewalk, the contractor can be held liable for that injury and be required to pay for any associated medical bills.
Anyone can sue over anything and a business owner may have to pay for a defense even if they are completely innocent of any wrongdoing. Just the cost of a defense can wipe out a business that isn’t properly protected. A properly covered business owner will be represented by the insurance company, as opposed to hiring their own attorney or representing themselves (which is another bad idea and a whole other article). Anyone with a business that deals with customers, vendors, or any other outside person, truly needs to consider liability insurance.
Starting and running your own small business, home-based or otherwise, can be an exciting and rewarding experience. While many people may not want to be bothered with such mundane aspects of business as insurance coverage, there is no way to avoid it. A little bit of research going in can save time, money, and even your entire business in the future. A knowledgeable insurance agent could turn out to be a small business owner’s best friend!
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