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If you’re running a small business that employs anyone other than yourself, you need business insurance. Small business insurance protects your business from the unexpected risks of running a business. This can include accidents, lawsuits, or even firing someone.
Some forms of insurance, like unemployment, workers’ compensation, and disability insurances, are legally required on a state and federal level. Others are just a very good idea. You should contact your state’s insurance department to find out exactly what kinds of business and professional insurance you need in your state. But in the meantime, let’s take a closer look at the types of business insurance you need, as well as those you might just want.
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Small Business Insurance You Need
The first type of small business insurance you’ll definitely need is unemployment insurance. Federal law requires businesses to have unemployment insurance, while the states administer it. That means each state handles its own unemployment insurance, using federal guidelines. Unemployment insurance covers the cost of unemployment benefits for workers who are laid off. You’ll pay into your state’s unemployment insurance program via payroll taxes, under the Federal Unemployment Tax Act.
Most states require small business owners to carry workers’ compensation insurance. This covers your employees’ medical costs and lost wages if they get hurt on the job. If an employee is killed on the job or passes away due to a work-related injury, workers’ compensation will pay for survivors’ benefits for their surviving dependents. It will also cover some final expenses.
You also might need professional liability insurance, or errors and omissions insurance, depending on your state and your profession. Usually doctors have to carry professional liability insurance, but in some states, lawyers and realtors have to carry it, too. Lawyers must have professional liability insurance in Idaho and Oregon. Doctors need to have professional liability insurance in Wisconsin, Colorado, Kansas, New Jersey, Connecticut, Rhode Island, and Massachusetts. Realtors need professional liability insurance in North Dakota, Nebraska, Texas, New Mexico and Rhode Island.
Insurance You Might Want
There are several types of insurance you might want, including disability insurance. A few states—New Jersey, California, Hawaii, Rhode Island, and New York—actually do require small business owners to carry disability insurance. Disability insurance can help replace lost wages for employees who have to miss work due to sickness or disability.
You probably also want commercial auto insurance. At least you do if you use any vehicles in the commission of your business. Your personal car insurance won’t cover any vehicles that you use to do business.
You’ll probably also want commercial property insurance to protect your property in the case of vandalism, weather, or other damage. You can also get general liability insurance for your business to protect yourself against claims from clients and customers, like slip-and-falls, for example. That way, if someone receives and injury on your premises, you won’t have to personally pay for their medical costs or any of the other costs that can come with getting sued, such as legal fees or settlement costs.
Similarly, if your business serves alcohol, you probably want liquor liability insurance. If an intoxicated person damages your property or hurts themselves on your property, liquor liability insurance will cover the costs. Moreover, if you get sued by someone who hurt themselves on your property because they were drunk, you won’t have to pay the costs yourself.
If your premises sustain damages that force you to close down temporarily, business interruption insurance would help defray the costs. This can help you get back to your regular business hours quickly.
Insurance Exclusions and Small Business BOPs
General policies don’t cover some events such as floods or earthquakes. You can get separate insurance policies for floods and earthquakes, but some things will be excluded from most policies. Acts of war, seizures of property by the government, infectious diseases, or radioactive contamination are among the most common exclusions from most policies.
If you want to buy a package, you can look for business owners policies (BOPs) that combine commercial property, general liability, and business interruption into one policy. It can be cheaper than buying three separate policies and it can cover a lot of your insurance needs.
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When you’re a business owner, it’s your responsibility to carry insurance to protect your business and its assets, as well as your employees and yes, even your customers. Business insurance can save you a lot of money. It’s also worth noting that some states don’t require you to carry some types of insurance. To be on the safe side, however, prepare your business for anything that might come along with the right combination of insurance policies.
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