Small Business Insurance Basics

When you're starting a new business, it's important to make sure you have used your small business accounting software to budget for insurance. Failing to purchase necessary insurance for your start-up can leave you in an incredibly risky situation, so make sure to do adequate research to figure out your particular needs. Once you're covered, you can relax and concentrate on daily operations worry-free.

Here are a few of the most common types of insurance for small businesses:

General liability

When you run a small company, you may be liable for both your own actions and those of your employees when they are performing duties related to your business. Examples include a slip-and-fall accident within your shop or a crash involving a staff member driving the company van.

If your business is structured as a sole proprietorship or partnership, general liability insurance will help protect you - both personally and professionally. General liability protects against claims of negligence, payments as a result of bodily injury or property damage, medical expenses and the cost of defending lawsuits. Business owners in some industries can also get specific liability coverage designed for those working in their sector.

Product liability

Product liability insurance is a specific kind of coverage designed for protecting businesses that manufacture, wholesale, distribute and retail a product. It will protect against claims of personal injury, property damage, negligence, breach of warranty, defective products and defective warnings or instructions.

Auto

If you provide workers with a company car or send them out in delivery trucks, you will need to purchase auto insurance. You can use your small business accounting software to determine how high you would like your deductable to be, which will affect your insurance payments.

Property

You can purchase several different types of property insurance at a variety of different levels of coverage. This type of insurance can protect against fires, electrical surges, burglary and more. Make sure you add on additional coverage if you live in an area known for earthquakes, floods or other types of natural catastrophes.

Property policies generally cover your building and the fixtures you use to run the business, such as carpeting and lighting. You may also choose to cover the contents of the building, such as computers, inventory and office equipment. Make sure you read your policy carefully and understand all of the limitations and exclusions.

Business interruption

Have you considered how your firm would be impacted if there were a natural disaster, fire or a similar catastrophe? Your property insurance would cover damages, but how would you continue to pay your bills without an income?

Business interruption insurance can help you pay continuing business costs that accrue during a period in which your business is non-operational.

Home-based business

A survey by the Independent Insurance Agents of America found that 40 percent of home-based business owners who were underinsured erroneously believed their homeowner's policy covered their business.

In fact, a typical homeowner's policy usually only covers only a small amount of damages incurred on the premises of a home-based business - and does not offer any liability coverage, leaving you open to lawsuits if, say, a client is injured when visiting your home.

Insurance tailored specifically to home businesses covers business property, professional liability, personal injury, loss of business data, theft and disability.

Workers' compensation

Nearly every state requires the purchase of workers' compensation insurance, a no-fault system that will pay medical expenses and wages to an employee who has been injured on the job. The particular details of benefits may vary depending on the state, so you should look into the particular laws of your state before you hire your first employee. Independent contractors, volunteers and some others are typically not covered under workers' compensation insurance.

Key employee insurance

When a company is small, there is usually a "key" employee, without whom the business would not be able to continue functioning. Typically, this individual is the business owner. Banks and other lenders often require a business to have key employee insurance to provide a way for them to recoup their money if the owner were to die or become incapacitated.

Business owners may also consider insuring a critical member of their staff, such as a worker who brings in the vast majority of revenue recorded with their small business accounting software. If they were to become ill or incapacitated, the process of replacing them could interfere with your revenue stream for several months, so this type of coverage would help replace those earnings.

Health insurance

As your company grows and you hire more employees, you may want to consider providing health insurance for full-time workers. Not only could offering health insurance benefits help you attract higher quality job candidates, but it is also likely to help you retain existing employees.
ADNFCR-1776-ID-19394035-ADNFCR


Subscribe via RSS Feed RSS

Small Business Article Archive

Small Business Article Archive

View more informative articles that are important to you.
More Articles
Subscribe RSS
View more informative articles that are important to you.

New to Quickbooks

We'll help you choose the right product, or get you started using QuickBooks.
Learn More
Learn More about Quickbooks

Intuit Communities

Get questions answered and learn from others like you. Intuit offers numerous small business and product specific communities where you can connect.
Business Tips & Tricks Blog
Starting, Running and Growing your Business
Women in Business
Intuit communities where you can connect about running a business