Types of Small Business Insurance
If you own a small business, you need business insurance. Most businesses need to purchase at least the following four types of insurance: Property Insurance, Liability Insurance, Business Vehicle Insurance and Workers Compensation Insurance. Here are explanations of each and additional insurance you might need to protect your business and qualify for a loan. Make sure you work with a good, ethical, and educated insurance broker. Cost and amount of coverage vary among insurers.
Commercial General Liability – Commercial general liability (CGL) is considered comprehensive business insurance, though it does not cover all risks that a business may face. It’s a standard insurance policy issued to protect businesses against various liability claims. Claims could include bodily injury and property damage or others. SmartBiz requires CGL insurance for every SBA loan.
Worker’s Compensation – SmartBiz asks for proof of Worker’s Comp insurance if it is required by the state where the business resides. (Most states require it). Worker’s Comp insurance covers medical costs and a portion of lost wages for an employee who becomes injured or ill on the job. Workers’ comp insurance also protects companies from being sued by employees for workplace conditions that can cause an injury or illness.
Business Property Coverage – This type of insurance covers the assets of the business that are securing the loan. The lender wants to ensure that if anything happens, the business will have what they need to get up and running again as soon as possible. Covered losses include computers and media, property of others, equipment breakdown, lock and key replacement, money and securities and more. Of course, coverage depends on the individual policy.
Product Liability Insurance If you manufacture, distribute or sell a product, this type of policy can protect your company from financial loss resulting from a product defect that causes an injury.
Flood Policy – If your business is located in a federally designated flood zone, lenders might require this type of insurance. From 2010 to 2014, the average commercial flood claim amounted to nearly $89,000. Flood insurance is the best way to avoid a devastating financial loss.
Building Policy – If the business owns the real estate where they operate, SmartBiz requires this type of insurance. (If they lease, it’s not necessary) This covers the structure that the entrepreneur owns where they operate their business.
Malpractice Insurance – This is a type of professional liability insurance purchased by health care professionals and sometimes by other types of professionals, such as lawyers.
Auto Insurance – If you use any cars or trucks for transportation you’ll need to have proof of auto insurance. Don’t let a fender bender bring down your small business!
Health Insurance – This may be required under the Affordable Care Act (ACA) to cover you and your employees. Health care can be very complicated so you should definitely consult with an insurance broker.
According to the Small Business Administration, Homeowners’ Insurance Policies do not generally cover home-based business losses. Depending on risks to your business, you may add riders to your homeowners’ policy to cover normal business risks such as property damage. However, homeowners’ policies only go so far in covering home-based businesses and you may need to purchase additional policies to cover other risks, such as general and professional liability.
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