Do You Know What Insurance Your Small Business Needs?

No sailing today

Let’s talk insurance.

I know that’s a little like saying, “Gee, wouldn’t a root canal be fun?” But insurance is a very necessary conversation in the life of any small business.

Not every business is the same and not every business needs the same type of insurance coverage.

You first need to perform a straightforward assessment of what insurance your business actually needs.  Here are a few things to think about:

Some Types of Insurance Are Required By Law

The three types of insurance coverage that your business is probably required to have if you have employees are: Unemployment insurance, Social Security and Workers Compensation.

Unemployment insurance benefits are usually paid under the laws of each individual state from the Federal-State Unemployment Compensation Program.  Your payments, as the employer, based on your total payroll, are contributed to the program.

The Social Security program is funded by employers, employees and the self-employed.  All payments go into an insurance fund that provides income after retirement or disability, or payments to dependents upon the death of the employee.

Workers’s Compensation Insurance protects you if an employee has a work related or on-the-job injury.  It generally pays the injured employee’s medical bills.  Each state controls coverage and provides benefits.  Coverage is usually provided by private insurance or an employer self-insurance arrangement.  The requirements in each state are different, so make sure you comply with what your state requires.

Optional Insurance To Consider

There are other types of insurance coverage that, while not required by law, should be obtained according to common sense.  Take a serious look at what your business liabilities and assets are and decide if you need any of the following:

Property Insurance

Property insurance usually covers the building where your business is located as well as the contents of your business.  In deciding how much coverage you need, some things to consider are:

First, what do you want to have covered? The more you have covered, the more the insurance policy will cost you.

Second, what risks do you need to be insured against? Theft, fire and flood are the most obvious.  With all the natural disasters we’ve seen in the news lately, flood insurance should be a serious consideration.  Find out if you’re in a flood plain and make sure you’re covered if you need to be.

Third, how much insurance coverage do you need? Remember, the more coverage you require, the higher the price.  Be realistic in assessing what you need and how much you can spend.

Liability Insurance

Liability insurance policies cover accidents for which your business may be legally responsible.  If any of these activities apply to your business, you might want to consider liability insurance coverage:

  • Interaction with the general public (Isn’t this most businesses?)
  • Customers visit your premises, be it your home or a storefront or office building
  • Your employees to drive a vehicle in the course of performing their job duties, you may be responsible for your employees actions if the accident happens in the normal course of their job
  • You sell a product to the public because you could be held liable for any injury that may be caused by the product

Health Insurance

This is a hot topic right now with the changes coming into play with the relatively, newly passed health care legislation.  There are many federal requirements that you need to meet and there are tax incentives available for small businesses that provide health care coverage.Be careful here because non-compliance with providing the required coverage can be costly.

Disability Insurance

This insurance provides income for employees who cannot work because of an accident or illness.  There are long-term or short-term policies.  Not to be confused with Worker’s Compensation Insurance, these policies pay the employee for non-work related illnesses or injuries.  Generally, two types of disability insurance exist:

Short-Term Disability usually means the employee cannot perform the duties of his or her normal job. Benefits are typically limited to a specific time period and the amount of compensation may be based on the employee’s salary.

Long-Term Disability benefits usually begin after short-term benefits expire.  They continue for as long as the employee is disabled or until they reach normal retirement age.

Lots to think about, right?

A thorough risk assessment for your business, from the very beginning, is one of the most cost effective steps you will ever take.  Getting the right coverage and getting the coverage that you actually need is just good business.

And as with any other process with serious potential for legal issues down the line, always consult an attorney to determine what’s best for you.  Contact me to schedule your comprehensive Business Building Benchmark today so we can identify the best course of action for you.  Normally, this session is $1250, but if you mention this blog post and we still have room on our calendar this month, we will waive that fee.

Integrated General Counsel