As a business owner I need to know which insurances I need to lower the dangers of unforeseeable circumstances. But to distinguish between the utile and the futile is not easy.
So what insurances do you need? First there are two different types of insurances:
- commercial business insurance – not required by the law, excepted when your particular business or state requires these. Refer to these insurance resources for more information
- employer insurance – required by the law
1. Types of Commercial Business Insurance
- General Liability Insurance - Protection against the legal problems with accidents, injuries and claims of negligence.
- Product Liability Insurance – Protects you against compensation for damages caused by a defect product, if you manufacture, wholesale, distribute and retail a product.
- Professional Liability Insurance also called professional indemnity insurance (PII) but more commonly known as errors & omissions (E&O) in the US – helps to protect professional advice- and service-providing individuals and companies against a negligence claim made by a client for example caused by malpractice, financial loss error or omission in the service or product sold by the policyholder. Depending on the state on the profession the governments sometimes require to subscribe this kind of policy.
- Commercial Property Insurance - This covers everything related to the loss and damage of company property due to a wide variety of events such as fire, smoke, severe weather, vandalism, etc. The definition of 'property' is broad, and includes lost income, business interruption, buildings, computers, company papers and money. This is definitely one you should talk to an insurance expert about to understand your specific needs.
- Home-Based Business Insurance - Homeowners' insurance policies do not generally cover home-based business losses. While you may be able to add on certain property damage riders to your policy, you may need to purchase additional policies to cover other risks, such as general and professional liability.
Since there are such a wide variety of insurance policies available, always discuss your individual business insurance needs with an insurance agent or broker.
2. Insurance Requirements for EmployersIf your small business hires employees, you are required by state law to pay for certain types of insurance. Here is a breakdown of the three key employee insurance requirements:
- Workers Compensation Insurance - Businesses with employees are required to carry Workers' Compensation Insurance coverage through a commercial carrier, on a self-insured basis, or through the state Workers' Compensation Insurance program. Visit your state's Workers' Compensation Office for more information on your state's program.
- Unemployment Insurance Tax - If you have employees you are required to pay unemployment insurance taxes as determined by your state. First you’ll need to register your business with your state's workforce agency. The State Taxes page on IRS.gov includes links to connect you with your state's agency.
- Disability Insurance - In the U.S., it is mandatory to purchase disability insurance only if your business is in one of six locations - California, Hawaii, New Jersey, New York, Puerto Rico and Rhode Island. You can find specific inks to these state insurance divisions here.
If your business is located elsewhere, the law does not require you to purchase disability insurance for your employees; however it can be purchased and provided as part of an 'employee benefit' scheme to your employees through commercial insurance companies.
Small Business Administration