Why you need insurance coverage for your small business

October 03, 2011

Every small businesses should protect their company with small business insurance.  Defending against claims and lawsuits can be a costly and time-consuming process. Yet many small business owners are unsure of the type of insurance they need to buy.

There are several types of essential insurance coverage for small professional service providers: professional liability insurance, general liability insurance, and business owners’ policies.  Small businesses with one or more employees should also consider workers compensation insurance.

General Liability insurance coverage covers physical damage to the property of others or injuries to others, as well as protection from claims of libel and slander. Many landlords will require their tenants who rent space in their buildings to carry this type of insurance so they can protect their property.

Small businesses that own their own buildings and have valuable business equipment may wish to consider a Business owners’ policy.  This type of insurance protects against damage to the property owned and used by the business and also combines the coverage found in general liability.

Professional liability insurance, also known as errors and omissions insurance, protects businesses from claims that the business was negligent in performing their professional services or failed to perform their services. This type of insurance is unique in that it insures the actual services your business provides vs. other types of insurance that typically protect against more general risks.  All buyers of professional liability insurance should make sure their insurance policy will appoint an attorney to defend them against lawsuits, even if there’s been no mistake.

It is important for businesses to partner with an insurance carrier that understands their business so that the policy can be tailored to fit its specific needs.  For instance, if your business subcontracts some work to others, it is important for the policy to cover the work of those subcontractors.  Otherwise, you may be left out in the cold if one of the subcontractors makes a mistake and your policy doesn’t cover their work.

What risks do different professions face?

Marketing consultants that help clients create advertising campaigns should ensure that their professional liability insurance policy includes copyright and trademark protection. If, for example, an advertisement created for a client accidentally contained a similar logo that’s trademarked by another company, the policy needs to respond to a potential copyright infringement claim.

IT professionals should consider software copyright infringement protection when selecting technology insurance. If an IT consultant were to accidently develop or use code that has been copyrighted by another company, that company could bring suit for a violation of their copyrights.

Business consultants should have a professional liability policy that will appoint and pay for an attorney to defend them if clients don’t realize the expected benefits from implementing their recommendations.  A business consultant may assist a client in developing a new internal process to increase productivity. If the recommendations proposed weren’t implemented according to plan and productivity drops, the client may still make a claim for lost income and costs for reworking the plan, even if it wasn’t the consultant’s fault.

Small business owners already face numerous challenges.  Protecting the business they’ve worked so hard to build shouldn’t be one of them.  Small business insurance that is tailored to a small business owner’s needs can help ease this challenge.  With the right insurance coverage, small business owners can gain peace of mind and focus their attention on what they do best – running a successful and sustainable business.  Get a small business insurance quote online today.