Small Business Insurance Do’s and Don’ts
Current insurance requirements for small businesses, insurance laws, and how to save big on business insurance.
As a small business owner, you are responsible for securing several different types of insurance for your company. Protecting your business assets, your property, and your employees’ health and well-being are a few of the reasons why business insurance is important – and, in many cases, mandatory.
The following is a list of different types of business insurance every entrepreneur should have.
Mandatory Business Insurance for Employers
There are several types of business insurance that are mandated by law to protect yourself, your business, and your employees. Your state government determines insurance requirements for business. Most states require businesses with employees to pay for workers’ compensation insurance, unemployment insurance and state disability insurance. Your state may also require insurance for specific business activities. Check with your state or contact your local city government offices to learn more about your state’s mandatory insurance requirements for small businesses.
Failure to obtain the proper insurance may mean you’re not able to launch a new business. If your business is already operating and you don’t obtain or maintain appropriate insurance coverage, you risk facing hefty fines or losing your business license.
In general, the following types of business insurance are required for all employers:
Workers’ compensation insurance supplements salaries or wages for employees who are injured on the job and cannot return to work, provides temporary and permanent disability awards to injured workers, and protects employers from potential lawsuits. Obtaining workers’ compensation for full-time and part-time staff is crucial in most states, and failing to comply with state laws can result in serious penalties for business owners.
Contact your state or CMR & Associates to ensure you have adequate coverage before working with any freelancers or contractors.
A joint state-federal program that provides cash benefits to eligible workers, unemployment insurance is administered by each state, but states follow the guidelines that are established by federal law. Each state’s unemployment insurance program is funded by the taxes paid by companies operating in that state. Your business pays for unemployment insurance with money that is submitted through payroll taxes. Companies who lay off more workers and have larger payrolls pay more into the state employment trust fund than those that don’t.
Disability insurance coverage allows employers to provide partial wage replacement insurance coverage to their eligible employees for non-work-related sickness or insurance. Employers located in California, Hawaii, New Jersey, New York, Puerto Rico, and Rhode Island are required to purchase disability insurance.
Other Business Insurance Coverages to Consider
Insurance coverage is available for virtually every conceivable risk your business could face. Depending on your state and local laws, your industry, and the type of equipment and products you work with, there are additional types of commercial insurance coverage you may need to consider. Discuss your specific risks with a licensed insurance agent or broker for advice on the types of coverage you should consider purchasing. Some recommendations include:
Commercial Property Insurance
Commercial property insurance protects your physical assets: buildings, equipment, and inventory. It could (but does not necessarily) also include business interruption coverage in the event of an emergency, such as a fire or natural disaster. If your business is unable to operate because of an emergency, business interruption insurance ensures you’ll be protected for lost profits, continued operating expenses, and some extra expenses for that time period. Whether you own or rent your business space, you should obtain commercial property insurance for your building’s contents.
Homeowners /Renter’s Insurance Business Rider
If you work from home, your personal homeowner’s (or renter’s) insurance policy may not cover home-based business losses. Depending on your business, you may want to add riders to your personal policy to cover normal business risks such as property damage.
Liability insurance protects you from lawsuits from customers, suppliers, or others with whom your company interacts and who claim you’ve caused them bodily injury, property damage, or other personal injuries or damages.
For most businesses who provide services to others, professional liability insurance is important. Professional liability insurance will protect you against third-party damages related to malpractice, errors or omissions arising from your professional services. In some states and some industries, professional liability insurance is a government requirement.
General liability insurance protects you against claims for physical injury or property damage caused by your premises, operations, or products.
Commercial Auto Insurance
If you have company vehicles, commercial auto insurance will protect them in the case of damage or an accident. Commercial auto insurance can be obtained for company-owned vehicles that are used to transport employees, products, or equipment. If you or your employees drive their own cars for business purposes – not for commuting to work, but for deliveries or client meetings, for example – look into non-owned auto liability coverage.
CMR + PolicySmart® is here to help
CMR & Associates’ risk management consultants can help you improve your business insurance coverage and reduce cost. We provide independent insurance advice by reviewing your current plans. Through CMR’s proprietary database – The CMR Database® (comprised of some 13,000 brokers and specialists globally), we maximize access to the insurance and retirement industry for greater options that will translate to better coverage and lower cost.
Please email CMR & Associates or call 877-447-4301 or 212-447-4300 for more information.