Let’s say you run a small business from your home. You don’t have employees; customers don’t come into your store (so no risk of them slipping on a wet floor and suing you); and your custom-designed hair bows aren’t going to injure anyone. Does your business need insurance?
In short, yes.
“But I run a home business!”
“Hold on,” you might be saying. “Does your business need insurance if you run it out of your home? Wouldn’t my homeowners’ insurance cover everything?”
Nearly 60% of home-based business owners agree with you, but this mindset only reveals how little they truly understand about their policy. In fact, most homeowners policies contain liability exclusions for all business-related activities. This means that any claims you have in your home related to your business would not be covered by your homeowners’ policy.
“But I have an LLC!”
LLCs are great for keeping your personal and business assets separate, but they won’t protect against losing the business you worked so hard to get off the ground.
What if an unsatisfied customer or disgruntled employee files a lawsuit against you? What if you or one of your employees makes a serious error? What if a fire destroys your computer, inventory, or office space? In each of these situations, an LLC is as useless at protecting you as a plastic bag against a hurricane.
It might help to think of your LLC as bankruptcy insurance. Sure, it can prevent you from losing your car or other assets if your business is sued, but in the end, you’ll still lose your business.
Types of Business Insurance
Every business is different, and therefore requires different types of coverage, but there are a few types of business insurance that are more universal than others.
- General Liability Insurance: If you don’t get any other type of insurance, get this one. General liability insurance protects against things like injury claims and medical payments, property damage, and attorney representation if you need to go to court.
- Professional Liability Insurance: This type of coverage protects against any mistakes that you or an employee might make. In the medical industry, it’s known as Malpractice insurance.
- Product Liability Insurance: If you sell a product, Product Liability insurance is worth looking into. This covers against any injury or damage caused by your product after it has been sold.
- Worker’s Comp: In Florida, you must have worker’s comp if you have 4 or more employees (full or part-time) or a construction company with even 1 employee. But having only 1 or 2 employees at desk jobs doesn’t make it any less likely that they will injure themselves while at work.
So…Does Your Business Need Insurance?
YES! Your business works hard so that you, your employees, and your customers can be happy. Don’t risk your livelihood just to save a few bucks.
The good news is that if you think your business “doesn’t need” insurance because it is so low-risk, the cost of insurance for you will be fairly low. You can always lower the costs of insurance by following best practices for reducing your risk. Talk to your insurance carrier for additional information.
Think of it this way: You probably consider yourself a safe, responsible driver, but you still have car insurance, right? That’s because you know that the risks far outweigh the cost of the insurance premiums, and “unlikely” doesn’t mean “impossible.”