| NYC Business Group
8 Types of Small Business Insurance
A small business insurance policy could be the defining factor to your business' success or failure in case of unexpected events. A small business policy is one you hopefully will not need to use compared to a car or health insurance policy.
However, it is unfortunate that 44% of small business owners have not purchased business insurance even after operating for almost a year. Buying the correct type of business coverage protects your products and business, from lawsuits and damage.
Purchasing a business insurance coverage can be a confusing process, hence why most small business owners ignore it. Each business, depending on the location, size, and industry, gets different insurance coverages.
The choices can be confusing; therefore, this guide informs you on the different types of business insurance. This information will help you discover the best business insurance cover for your business.
What is Business Insurance?
The common types of insurance policies that most individuals have experience with include car insurance and health insurance. These insurance policies are essential for protection if something happens, for example, a disease or accident.
Business insurance works in the same way as personal insurance, ensuring your business is protected from legal or financial claims during unexpected events like lawsuits, disasters, and accidents. Just like in personal insurance, there are many types of business insurance policies.
The types of business insurance policies are classified depending on several factors, which include.
• The business industry.
• Presence or absence of employees in your business
• The operation procedures of your business
• What you do
There are nine types of business insurance policies to consider for your business, with three being a requirement of the law for businesses with employees.
Contact a Broker at our Agency to get a Quote on Business Owner's Policies.
Reasons for Purchasing a Small Business Insurance
Most business owners in sole proprietor businesses or with few employees may not feel the need to have business insurance. There are several reasons, however, why you need to purchase a policy for your business.
1. To Protect Your Income and Assets
There are many risks associated with starting up a business, with nearly a third closing down before their second year. Reasons that would result in a business closing include a more prominent competitor entering the market, difficulty in financing the business, or poor economic conditions.
Despite business insurance not eliminating the challenges and risks of operating a business, it does cushion it against legal claims and property damages.
2. Litigation Purposes
According to the SBA, between 36% to 53% of small businesses face litigation issues every year. Most of these businesses are without insurance, making it more expensive to purchase coverage than it would have been if they had already had a policy in place.
3. Requirement by Law
Certain types of business insurance are required by law. Businesses with employees in most states, for example, are required to purchase unemployment and employee compensation insurances. Some states may also require a business to purchase a disability insurance.
4. Funding
A business owner will be obligated to purchase business insurance when taking up a financial institution loan for their enterprise. Fundraising from investors may also require your business to be insured.
5. Industry Requirements
The business industry ventured in may require insurance. For example, cyber liability insurance is helpful for a business dealing with sensitive data online.
Types of Small Business Insurance
There are several types of business insurance but discussed below are the nine top ones to consider when establishing the type of insurance, you need for your business. Our Dedicated Agents can Help you Find out What Coverage You Need, Click Here!
I. Workers Compensation Insurance
Workers compensation insurance is one of the three required by the law of a business with employees. The state requires this type of insurance to protect the employees if they get injured or hurt. Failure to purchase this insurance may result in hefty fines and, in rare cases, criminal penalties, hence why it is not to be taken lightly.
The workers' compensation insurance settles medical expenses for an employee who experiences work-related injuries and pays them a portion of their wages as they recover. This insurance also covers the cost of defending a lawsuit if an employee sues the company for work-related injuries.
Worker's compensation insurance can be purchased from a private carrier or a broker with quotes ranging from 0.75$ to 3$ per month per 100$ in employee wages. State-run insurance funds offered by many states, including New York, sell the workers' compensation insurance at regulated rates.
II. Unemployment Insurance
Another type of government-required insurance is unemployment insurance. It covers your employees in case of job loss or termination. An individual can apply to receive for their unemployment benefits once they are out of work.
Unlike the rest, this type of insurance cannot be purchased from a broker or insurance carrier. Here, while settling other payroll taxes, the employer pays the Federal unemployment tax(FUTA) and State Unemployment Taxes (SUTA).
The amount of tax to contribute towards FUTA and SUTA depends on whether the business is new or established, its number of employees, and their turnover. For new business owners, it is essential to contact their state's unemployment agency and sign up for an employer's account on the employment of the first employee.
III. Disability Insurance
Disability insurance is the last of the three government-required insurance.
At a percentage of their income, ranging between 0.25%to 0.50%, the disability insurance guarantees payment to employees who cannot work due to disability or illness that does not have to be work-related. For example, after giving birth, an employee can receive Paid Family Leave benefits.
New York, Hawaii, California, New Jersey, and Rhode Island are the five states that currently require employers to offer short-term disability (SDI) insurance for their employees. Short-term disability insurance covers employees for three to six months of disability to work.
SDI is recommended for employers outside these states for the sake of their employee's peace of mind and standing up against competitor employers. Though rarely provided, there is also long-term disability insurance, which covers the employee until the expiration date on the policy or until they resume work.
IV. General Liability Insurance
Though not required by the law, general liability insurance is one of the insurance policies every business should consider having. This insurance protects the company if a third party like a customer, client, or vendor gets injured at your business premises or by the products and services you offer.
Below are the types of losses covered by the general liability insurance.
- Physical injuries inflicted within the business premises.
- Advertising injuries such as claims of invasion of privacy, stolen ideas, slander, etc
- Damage of another individual's business or property while running your company.
Businesses in the industry with a high risk of accidents, such as construction and manufacturing, are highly encouraged to have this coverage. The general liability insurance cost ranges per year and varies with your specific industry's risk level. Click Here to Obtain General Liabilty Quotes Today!Click Here to Obtain General Liabilty Quotes Today!
V. Commercial Property Insurance
Commercial property insurance covers all your business property, for example, equipment, business inventory, and office space, against damage or loss. For businesses with physical locations for their operations, commercial property insurance is a must-have.
This insurance cover protects the small business against events such as theft, fires, vandalism, and selected weather-related damages. However, not all commercial property policies will cover extreme disasters like tornadoes or earthquakes and only compensate for events like flooding caused by a pipe-burst.
A business owner may be required to add on this amount depending on their location and the likelihood of different disasters to have them covered.
Add onto the commercial property insurance with a business interruption insurance to cover income lost during the period your business is closed. For example, if your shop burns down, rebuilding takes time. The business interruption insurance covers the lost income during that period.
VI. Professional Liability Insurance
This type of insurance is also referred to as malpractice insurance, often associated with professional service providers, such as doctors and lawyers. For example, in case of an error during surgery, the professional liability insurance covers the doctor's lawsuit costs.
The errors and omission coverage applies to small businesses that offer professional services for protection in case of a professional omission. For example, if you omitted a procedure that could result in the client losing money and sued for damages, the professional liability insurance protects you.
However, it is essential to note that professional service providers who consider purchasing this insurance should also have general liability insurance as they cover different things. The former covers clients' or third parties' financial losses while the latter covers advertising injury, property, and physical damage. In Need of Professional Liability, We Can Quote You by Clicking Here.
VII. Product Liability Insurance
Product liability insurance is a must-have for businesses dealing with tangible products. This policy can be an addition to the general liability policy or a stand-alone policy. It covers the business owner against lawsuits in case their product is defectively manufactured products or packaged.
VIII. Employment Practices Liability Insurance
Employment practices liability insurance covers the business against employee claims of wrongful termination or employment discrimination. For example, if an employee complains of racial discrimination in your company, this insurance covers the cost of defending the claim.
The cost of this small business insurance varies depending on;-
- Whether the company has been sued for wrongful termination before
- The size of the workforce in the company
- The level of business turnover
- The industry your business is in.
Small businesses often do not have full-scale HR departments, making them very vulnerable to wrongful termination suits. The employment practices liability insurance is therefore essential to help save business thousands of dollars in lawsuit costs. 
Cost of Business Insurance
There is no overall fixed cost for business insurance. As earlier mentioned, you can purchase various types of business insurance policies for your small business. The amount your business is going to pay for insurance varies on several factors, including
- The type of policy you want.
- The number of policies you intend to purchase; for example, you could have both general liability insurance and malpractice insurance.
- The coverage of your policy, for example, the commercial property insurance, may cost more for business in areas with a likelihood of disasters like earthquakes.
- The number of employees in your business
- The industry your business deals in
- The location of your business
- The years you have been in business.
As a small business owner, you may not need all the types of insurance discussed above. Ensure to sit down with a broker to identify the type of business insurance you need. Click Here to Contact our Office, We Can Give You Prices & Choices Today!
Conclusion
Running a small business involves a lot of risks, uncertainty, and unknowns. Every decision made should be with your business's best interest in mind, including selecting a business insurance policy.
The process of combing through the various types and setting for one that best suits your business may seem tedious and time-consuming. However, it will be all worth it when the unexpected happens, and you have the business insurance cover to fall back on.