Risk management is one of the key aspects of running a successful business. As a fledgling entrepreneur, one of the easiest ways to protect your business against business related risks is to carry the right business insurance coverage. It’s important to note that more that more than 40% and 70% of small businesses in the US are uninsured and underinsured, respectively. Moreover, according to FEMA, close to 60% of small businesses in the US fail to reopen after a major disaster. This means that as an entrepreneur, you cannot afford to ignore business insurance coverage. However, finding the right coverage can be challenge, especially if you lack the necessary knowledge. To get you started, here are four insurance tips from Public Liability Insurance Australia for new business:
Tip 1 – Treat Business Insurance as an Investment
The business world is full of risks. Therefore, ensure you get business insurance coverage right from the start. Remember, the cost of business insurance is typically lower than what you stand to lose in the event of a disaster. Therefore, you should not consider business insurance an unnecessary expense, but rather as a way to safeguard your livelihood. In fact, the whole point of carrying business insurance is to protect your business and personal assets against the financial loss associated with disasters and events such as work-related injury, theft, data breach, negligence, and product liability claims.
It’s important to note that even a home-based business needs business insurance coverage because a standard home insurance policy not only offers limited coverage, but also excludes business-related liability claims. The easiest way to protect your home-based business is to add an endorsement on your homeowner’s insurance policy or better yet, purchase a business owner’s policy, which bundles liability and property insurance into one policy. However, depending on the nature of your business and industry, this may not be enough. For instance, if your home business entails handling customers’ financial details, you need a standalone cyber insurance policy because a homeowner’s insurance policy does not cover data breaches.
Tip 2 – Purchase All Essential Business Insurance Policies
Business insurance coverage may not only be a good investment for your new business, but also a necessity. Depending on your clients, industry, lenders, and state, you may need to carry certain business insurance policies. For instance, if you’re renting business premises, your landlord may require you to carry commercial general liability (CGL) coverage to cover potential third-party liability claims resulted to property damage and bodily injuries. Your state may also require you carry certain coverage. For instance, if your based is based anywhere other than Texas, you need to carry worker’s compensation coverage. At the same time, if your business offers professional services, your state may require you to purchase professional liability coverage.
Some clients have insurance requirements for their contractors. These requirements generally vary based on the industry and the risks involved. Therefore, to prove to a client you’re able to cover any financial losses in case the worst happen, you have to meet these requirements. Take note that you can use a commercial umbrella policy to enhance the coverage limits of your underlying liability policies including employer’s liability insurance, commercial auto plan, and general liability coverage. To avoid underinsurance, research the legal obligations for your industry.
Tip 3 – Cover Your Employees
If your business employs workers, you should carry worker’s compensation coverage. While worker’s compensation requirements generally vary across state lines, only the state of Texas does not require employers to carry this type of insurance coverage. Worker’s comp coverage is designed to protect both employers and employees against the costs associated with a workplace injury, illness, or death. To avoid falling foul of worker’s compensation laws, you need to know the difference between an employee and a contractor. This is particularly important because, in certain cases, a 1099 worker can be an employee. Therefore, you should understand what your state’s laws say regarding this matter.
Take note that if you hire 1099 workers, you can be held liable for their actions while working for you. For instance, if you hire an electrician who sexually harasses one of your employees, the employee in question can sue you because you’re the one who hired the electrician. Therefore, your liability coverage should also cover independent contractors. Additionally, you should carry employment practices liability insurance (EPLI) to protect yourself against lawsuits related to wrongful termination, workplace discrimination, harassment, or other such issues.
Tip 4 – Get Commercial Auto Coverage
Standard personal auto insurance policies exclude business purposes. This means you’re your personal auto plan won’t cover any damage to your car resulting from a work-related accident or peril. Therefore, if you use your personal vehicle for business related purposes, say, carrying inventory, you should purchase commercial auto insurance coverage. Alternatively, you can increase the coverage of your auto insurance policy by adding an endorsement on your general liability plan. Other important policies to consider in this regard include non-owned and hired auto insurance coverage.
Conclusion
Virtually all businesses are susceptible to business risks. Therefore, as the owner of a new business, you should treat business insurance as an investment, get commercial auto coverage, cover your employees, and purchase all essential business insurance policies.