Question: Do you have the business insurance you need?

There’s no way around it—you personally cannot control or eliminate every potential risk that threatens your livelihood, particularly when operating a small business. Business insurance can provide the protection against these risks.

However, insuring your business is not as simple as insuring your car. Because your business is distinctive, you’ll need to design a package of insurance that meets your business requirements and provides the level of protection you’re comfortable with. Your first decision is to decide which types of insurance your business needs.

In an effort to simplify matters, the following guide outlines various types of business insurance that many small businesses often require: property insurance, liability insurance, disability insurance, and business interruption insurance.
1. Property insurance protects the assets your business owns from destruction or damage. Your home insurance does not cover business equipment, so it’s mandatory to protect your business assets with separate content insurance, which protects these assets from fire, floods or theft.

2. An adjunct to property insurance, business interruption insurance compensates you for lost income if your company has to vacate your office space due to disaster-related damage that is covered under your property insurance policy, such as a fire. Business interruption insurance covers the profits you would have earned, based on your financial records, had the disaster not occurred. The policy also covers operating expenses that continue to accrue even though business activities have halted.

3. Liability insurance is another “must” for small businesses. Its goal is to shield your business from lawsuits. General liability insurance protects your business from liability arising from negligence that may cause injury to others, such as a customer or employee. It also protects your company if someone is injured as a result of using your product or service.

Also, if you sell manufactured goods, check to see if your general liability insurance policy also covers product liability. If not, you’ll want to add this to your package. If you’re a professional, such as a doctor, lawyer or consultant, you should also consider carrying professional liability insurance.

4. Disability insurance is another common type of insurance carried by small businesses. Re-examine your assets and liabilities to determine how long you can go without income. Assess your expenses and make the necessary adjustments for a disabled lifestyle. When determining your disability insurance needs, remember you can’t purchase 100% income coverage. Insurance companies won’t cover your full income because they want to provide motivation for you to return to work. Most policies cover anywhere from 40% to 80% of your income depending on how much you’re willing to pay.

5. Workers’ compensation insurance pays for the rehabilitation, recovery and medical bills of employees’ work-related injuries, as well as lost time when they are unable to work due to these on-the-job injuries. In most states, workers’ compensation is required when you have one or more employees.

For more information about the various types of insurance available to small businesses, visit the Insurance Information Institute Web site at http://www.iii.org/.

Other resources include http://sbinformation.about.com/od/insurance/Small_Business_Insurance.htm and www.buyerzone.com/business_insurance/biz_types.html

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