While major companies always have business insurance, many smaller companies believe they do not need it – or they don’t know what it is.
What is business insurance? Does your company need it? How will it protect you?
The basics on business insurance
Business insurance is like any other insurance – home, car, life – except that it covers your company. There are many types of business insurance that you can carry, including:
- Property insurance
- Liability insurance
- Vehicle insurance
- Contents insurance
- Business interruption insurance
The types of business insurance a company requires depend on what work the business is engaged in.
There may also be situations that force companies to carry certain types of insurance. For example, a commercial lease may have a clause requiring the tenant to hold business insurance that includes commercial general liability insurance.
Does your company need small business insurance?
The simple answer is that if you have a company where people pay you for goods or services, then you should be carrying business insurance.
It really comes down to this: No matter how careful you are, issues can arise. These issues can lead to inventory being lost, assets being damaged, or even business stoppages – all of which can be costly.
Most small companies do not have the financial ability to cover these costs without business insurance. This means that, if issues do arise, the company can be in jeopardy. By carrying business insurance, you can avoid this situation.
When you are running a company, you also have to consider the issue of liability. What happens if a customer is hurt by one of your products? What if an employer is injured on the job? What if a mistake is made, costing a client money? If a situation such as this occurs, you want to make sure that both your company and the injured party are cared for. The only way to ensure that happens is to make sure you carry business insurance that includes a liability clause.
It is especially important to carry business insurance if your company is not incorporated
A corporation functions as its own entity. Unless there is negligence involved, any costs related to your corporation cannot be attached to you personally.
But when your business is not incorporated, you are personally on the hook for any costs related to the company.
If there are debts related to an unexpected issue or if a lawsuit arises, collections agencies can come after not just your company, but you personally. In some cases, a single suit can leave businesses and their owners bankrupt.
While one of the best ways to protect yourself from this is business insurance, remember that you are still not protected against acts of negligence.
Consult with one of Benchmark Law’s small business lawyers if you want to find out if your business should carry insurance.