insurance contractYou’ve taken the plunge and are now an entrepreneur. Congratulations! You’re on your own which potentially means more freedom. On the flip side, you'll no longer have corporate card reimbursements. Now, you have to pay for everything yourself.

Insurance for your business

Sometimes a bank or a landlord may require specific insurance as part of a contract to do business. When and if this happens, you should thank them.

Why should you thank them?

Sometimes, people start a business and don’t think about insurance until it’s too late and find themselves facing a lawsuit. Moreover, when pricing a product or service businesses should contemplate the cost of insurance as part of their overhead.

Depending on your profession, there may be a few types of insurance coverages you need (or want) to buy. I distinguish between want and need because, as mentioned above, there are circumstances that require you to buy insurance. Insurance protects you from having to pay out-of-pocket thereby protecting your assets. This is why you should want to buy insurance, to preserve your assets and thereby your growth in wealth.

Types of insurance coverages to consider for your business

General Liability protects you against bodily injury in the event someone slips and falls on your premises. Depending on the nature of your business, the policy may or may not include personal and advertising injury should there be an accusation of any misuse of someone’s likeness.

Worker’s Compensation (“work comp”) insurance protects workers in the event they are injured “on the job” or during the course of performing their duties while working. This coverage is typically required by the state once you hire an employee that is paid W2 income. The clock starts ticking on your obligation to purchase work comp immediately. Work comp is based on occupation so it can be very expensive depending on the nature of your business.

Disability Benefits Law (DBL) goes hand in hand with the work comp requirement. This pays an employee if they are out of work as a result of an injury sustained off the job. Examples of this would be a skiing injury or maternity leave. This coverage is an extremely limited benefit and is not terribly costly to the employer as it is not based on type of occupation. There are companies also that offer enhanced benefits for this coverage offering 5 times the statutory limit. Even if just for yourself, you may want to consider taking advantage of this coverage. It is nominal in cost and since accidents happen, the weekly benefit could help tremendously while you are recovering from an injury and unable to work.

Professional Liability insurance is also referred to as malpractice or errors and omissions insurance. This protects you in the event of inadvertent negligence causing a financial hardship to the client who then sues you for damages.

These types of insurances protect your out-of-pocket expenses. Imagine if you were sued as a result of injury or negligence? What happens next? You would have to pay out-of-pocket for alleged damages and/or hire an attorney to defend you regarding the alleged damages. An attorney is going to charge whether you are innocent or guilty. Professional and general liability insurance covers the cost of an attorney and the damages settled against you.

I enjoy the phone calls we get from people who are doing research and their due diligence when looking to start a business. They want to find out the cost of coverage ahead of time so they can understand the expenses involved on an annual basis. This helps them determine how much their services should cost when marketing their business.

I hope you consider these types of coverages as you build your business too. 

Photo: morgueFile