Small business protection: 4 risks you should protect yourself from

November 19, 2019

It takes courage to be a small business owner. You’ve had your lightbulb moment, maybe secured some financing, and are getting your endeavor off the ground. Kudos. That’s already taken a lot of guts. Now is the time to make sure you’re protecting what you’ve built from risks you can anticipate and those you don’t see coming.

Every small business faces risks associated with changing economic conditions, competition, or other market forces that are best guarded against with education, solid financial management, and contingency plans.

Then there are some risks specific to running your small business that you can prepare for with risk management strategies, such as business insurance. This protection can help you take on the right risks that contribute to the growth of your company and give you the courage to take on all of your small business dreams.

Pro Tip: Read Business Insurance 101 for more info on protecting your business.

Here’s a look at four common risks that small businesses face that can be covered by insurance policies.

1. If a customer sues, you don’t have to face it alone

Suppose you’ve started a web design company, and you create a new website for a company. The day it’s launched, a bug in the design causes the site to crash, and it stays down for three days while you diagnose and correct the problem. The client could sue you for the income they lost because their site was down.

Not your fault, but lawsuits can be costly regardless. Plus, sometimes, despite our best intentions, mistakes happen.

This is where professional liability insurance comes in. Also known as errors and omissions coverage, this type of insurance protects you from claims of negligence during the course of conducting business.

If your business provides a professional service or regularly gives advice to clients, you should consider a professional liability insurance policy.

2. If an accident happens, you can keep your business on track

If you’re an IT consultant, you may work with other companies’ expensive computer hardware that contains business-sensitive data. But, oops, you just spilled your iced coffee into a key computer component, causing extensive damage.

If you have general liability insurance, you could be covered from incidents like this one. General liability insurance protects against a third party’s claims of property damage or bodily injury in case of an accident, as well as claims of personal injury such as libel.

You should especially consider this type of insurance if you:

  • interact with clients face to face at their offices or yours, where someone could get hurt in an accident
  • have access to a customer’s property, which could get damaged by one of your employees
  • market your company with advertising, where you could face copyright infringement risk.

3. If your own stuff gets damaged, you’ve got backup

Sometimes general liability isn’t enough, like if you spilled that iced coffee on your own computer.

The insurance world can be confusing at times, and many small business owners might not know that general liability only protects against third party claims, not claims involving your own business.

That’s where a business owners policy (BOP) comes in. This type of insurance combines general liability coverage with property insurance that protects your furniture, equipment, and tools that you need to do your job. 

4. If you get hacked, you can recover

The information age in which we live has opened up many exciting business opportunities and made our lives more convenient. But the interconnected nature of commerce can also leave your business open to internet-based data theft.

If you’re accepting credit cards or other digital payment types and storing confidential customer information, you need cyber security insurance as part of a comprehensive plan for preventing, detecting, and mitigating digital risks.

A cyber insurance policy covers privacy, data, and network exposures and offers both immediate and longer-term support such as:

  • data breach response and data recovery
  • coverage for losses from business interruption

While you might not be able to foresee every risk scenario, having the right type of business insurance can give you the peace of mind to focus on what’s really important to you – growing your business and helping your customers. Not having to worry about a worst-case-scenario causing you to have to close up shop can give you the courage to continue building on your success.