Consumer Hub: Protection & Prevention

Essential Insurance for Small Businesses: What You Need When Stuff Happens!

If you frequently visit this site, you know ethics and compliance are passions of ours. That’s because we believe doing business ethically is the quickest path to long-term success and that failing to comply with the law is potentially the straightest route to failure. Consequently, we believe that having a great business idea, excellent products, and well-conceived and documented procedures will only take you so far. You still need to have a personal commitment to doing business ethically and to obeying the law in every respect.

Unfortunately, life has a way of making other plans for your business, distracting you from the straight-and-narrow ethics/compliance path. Bad people steal your merchandise, customers file and errors-and-omissions insurance complaints, or you get into a car accident while on company business. In such cases, having behaved ethically and legally may well limit the damage, but you still need help to deal with the financial implications of the loss. Enter insurance.

As consumers, we all know the value of insurance in protecting our homes, vehicles, earning potential, and lives. But business owners sometimes minimize the risks of going uninsured, thinking that “bad stuff” will never happen to them. Nothing could be further from reality. Every company faces serious risks the minute it receives its operating license or opens its doors each day. And failing to address these risks can spell the difference between a firm that weathers a damaging event and one that succumbs to it.

So what type of insurance should most small business buy? Here are five important policies to consider. There are many other niche coverages, but these six are the bedrock protection from which most businesses will benefit.

  • General liability insurance. Protects you in the event you or an employee causes bodily injury or property damage or personal injury to a third party. So-called commercial general liability (CGL) insurance provides funds to pay for claims of bodily injury, property damage, libel or slander, advertising injury because of something going wrong with your products, on your premises, or in your operations. A CGL policy provides the money to help defend against and settle such claims.
  • Property insurance. Protects you in the event a building you own or other business property sustains damage. Imagine if a fire destroyed everything in your office. Would you be able to replace everything out of your own pocket? Property insurance provides funds to replace the equipment you need to continue operations.
  • Commercial auto insurance. Covers any vehicles owned by your business. It pays money to third parties who sustain bodily injury or property damage as a result of you or an employee driving a company vehicle and causing a loss, up to the coverage limits included in the policy.
  • Worker’s Compensation Insurance. Replaces the wages and pays medical benefits to employees who get hurt while on the job. Employees who receive these proceeds relinquish their right to sue you for the incident in question. Just as states require consumers to maintain base levels of auto liability insurance, all states require businesses to have worker’s compensation protection for any W-2 employee.
  • Errors and Omissions Insurance. Designed to protect professionals and others who provide business services in case their performance (or lack of performance) harms a customer, leading to legal action. It provides payments, up to the policy limit, for defense costs and damages, freeing the business owner from having to fund these expenses out of company cash flow or assets.
  • Business Owner’s Policy (BOP). Bundles a variety of coverages into one contract, providing complete peace of mind. It typically includes business interruption insurance, property coverage, vehicle protection, and liability insurance, among several others, often at a lower cost than if purchased separately.

As with all things insurance and finance, it’s helpful to seek professional advice before purchasing insurance for your business. Finding a helpful insurance agent today is extremely easy, with thousands vying for your business in cities large and small and across the entire Internet. But don’t just rely on a Google search to find one; ask friends, neighbors, and colleagues for referrals. Tap agents affiliated with your professional associations. And explore social media (LinkedIn and Facebook , especially) for insurance professionals in your community.

Now here’s the good news. With your commitment to doing business ethically and complying with all laws and regulations, your risk exposure should be modest at best. But if a fluke incident strikes your firm, being fully insured will provide ultimate peace of mind and allow a quick return to business as usual.

For more information on affordable errors and omissions insurance for low-risk financial advisors, visit E& For information on ethical sales practices, please visit the National Ethics Association’s Ethics Center