How Much Business Insurance Is Needed?

How Much Business Insurance Is Needed?
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Insurance is not anything you think about until you need it. Just like you need a legal entity for your small business, you also need to make sure you protect your business and yourself. Which is why you need business insurance. But it is confusing. When is the last time you evaluated your insurance needs? There are a few things that can trigger additional insurance needs, such as adding payroll employees, signing a business lease, or getting a contract with a Fortune 500 company. I’ve developed a list of the different types of business insurance available so that you can best figure out what your needs.

Worker’s Compensation

If you have employees other than yourself, you are required to carry worker’s compensation insurance. How much depends on what your state requirements are and what your employees do. Typically, this type of insurance policy protects your employees if they are hurt on the job, It also protects the business from having to pay medical expenses and disability payments if an employee is injured while working.

General Liability

Sometimes customers get hurt in an icy parking lot, and will want sue you, this is what general liability insurance is for. Also major corporations will not do a contract with a small business that is not insured. If something happens to one of your employees on their location, they do not want to be responsible. General liability coverage will also pay for theft, fire damage, destruction of business property as well as any medical expenses or settlements in cases with customers. You are also required to have a general liability policy if you have a business lease or retail storefront.

Key Man Coverage

If something were to happen to you or your business partner, would your business survive it? Often, major illness or death means the immediate closure of a small business, and that’s why key man coverage is so important. It helps companies transition through the loss of a key member of the leadership team. Even if your partner and surviving spouse decides to sell or shut the business down in case of your death, this policy will provide the resources to manage the business until the sale offer is accepted.

Errors and Omissions

This type of liability insurance is important if you are a professional service firm, as it protects you in the case of a civil lawsuit. If a client says you gave bad advice and sues you. You E and O insurance will help cover your legal expenses. If you are a medical or legal professional, you likely are required to carry this type of insurance, so check with an insurance broker to ensure you have the appropriate coverage.

Typical Business Insurance Questions

Do I need business insurance for a home-based business?

You bet. Running a business out of your home doesn’t mean it is not a business, and your home owners insurance will not cover a business loss. Look into a business owner policy, which will protect your home office equipment in case of loss, theft, or damage. At the very least, you need general liability coverage, if you are a service provider with corporate clients.

How much coverage should I have?

It depends on the type of business you are in and how you do business. You may be required in certain circumstances to carry a specific amount of coverage, such as if you do business with major corporations they typically require vendors to have at least a $2 million liability policy to protect their interests in case you make a mistake.

How should I store insurance documents?

Store insurance documents in a safe place. Small business owners should keep their insurance policy and certificate of liability insurance in a fireproof safe or safety deposit box. Doing so will make sure you can contact your insurance provider quickly should you need to file a claim, so you don’t scramble to find the necessary paperwork to do so.

How to I learn about business insurance?

There are insurance brokers who are happy to give you information. Start with the company who sold you your homeowners or renters insurance. Review the terms in business contracts with large corporations to see if there are business insurance requirements you must meet. It’s also wise to review your financial statements and make an equipment list so you can answer questions about these elements when you speak with an insurance professional to determine the amount of coverage needed.

How much will I pay for business insurance?

Again, that will depend on what kind of coverage you choose, but there are insurance companies that cater to small businesses such as Hiscox. A general liability policy can be as low at $500 a year. Factor this expense into your budget so you can afford it when the quarterly renewal bill comes due.

If you are in business, you need business insurance, and you’ll kick yourself if you don’t have it and then need it. It’s a required expense to protect your household and your business.

This article was originally published as What Kind of Business Insurance Do You Need on

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