Chapter 10: Business insurance
What’s your liability exposure?
For most new businesses, insurance coverage is essential for survival. To take a reality check, ask yourself what would happen if:
- An employee or visitor falls in your office.
- A customer takes an action based on advice on your website and it all goes wrong.
- There’s a fire and your equipment is damaged.
- A customer is injured as a result of a faulty product.
The list can go on, but it’s clear, you will need general liability insurance and some other specialist policies. In some cases, insurance will be a legal requirement such as Workers Compensation for your employees.
You can either go direct to an insurance company like Allstate or talk to a broker to get advice on the type and level of coverage that’s right for your business.
Workers Compensation insurance
If you have employees, you must have workers comp insurance:
- Some states provide it and you pay it directly via payroll.
- In other states, you provide it through an insurance company.
General liability and premises insurance
To protect your premises:
- Calculate the value of the equipment and inventory on your premises.
- Check the scope of coverage – does it cover fire, theft and natural disasters?
- Check your rental or lease agreements – they may specify a level of coverage.
This type of insurance protects you against claims from employees for issues like:
- Sexual harassment
- Unfair dismissal
Business interruption insurance
What would happen if a fire, a power outage, a major website hack or computer virus, hit your business? Any of those things could prevent your business from operating normally. If the interruption goes on for a length of time, it could seriously damage your business or even cause bankruptcy in extreme cases.
Business interruption insurance covers you while you cannot operate your business normally.
Did you know?
Business interruption and contingent business interruption losses typically account for 50% to 70% of catastrophe losses
You are not required to provide it as a startup. You could suggest your employees sign up to their own plans or you could make a contribution to a healthcare insurance plan.
If your employees drive a company car or truck or use their own car for business, make sure they are covered for the period of time they drive on behalf of the business.