We all know the importance of health insurance and car insurance but when it comes to small business insurance not many opt for it because of the assumption that it won’t be used. When something unexpected occurs, small business insurance can make the difference between business continuity or its failure.
A lot of small business owners avoid purchasing business insurance due to the lengthy procedure and extensive documentation involved. Each business needs a different insurance package which could vary based on the size of the company, its location, sector, etc. The available insurance choices can be overwhelming for businesses that have just entered the market.
Business insurance functions in the same manner as personal insurance. It helps to protect your business against financial, legal, or other losses in the event of an accident, disaster, lawsuit, etc. Similar to personal insurance, there are various types of business insurance, and you can select them based on what your business needs.
Mostly you can address questions like what you do, operating model, number of employees, sector, etc to narrow down on the insurance requirements. Ultimately it is up to you to decide the types of business insurance needed and where to find them. Read on to find out more about small business insurance coverage.
Additional Reading: All That You Need to Know About Commercial Insurance
Why is insurance coverage essential for a small business?
The first question to ask is, why do you need business insurance? If you have a sole proprietorship business or you are running the show with just a few employees, you may feel that small business insurance is not a requirement.
In reality, the risk associated with a business will justify the business insurance need and how it can help protect your assets (both personal and business-related). It is a well-known fact that nearly a third of businesses tend to fail before completing their second year. This may be due to numerous reasons, like a lacklustre economy, a larger competitor’s entry, lack of business financing, etc.
Business insurance helps to safeguard your business against any kind of property damage and also legal claims. Statistics suggest that almost 36 to 53% of small businesses have to face litigation in their lifetime and most business owners lack the financial means to sail through such issues. Thus, the cost of no insurance is much higher than the cost of insurance.
Certain types of business insurance are also necessitated by law. Workers’ compensation insurance may be mandated for certain sectors as is the case with unemployment insurance. Disability insurance is a must for some industries.
You may feel obligated to purchase insurance coverage while raising money for your business or seeking a business loan. A lot of requirements vary by industry. For example, a real estate agent who runs the show with a car will need to purchase commercial auto insurance. A company which handles sensitive online data may have to purchase cyber liability insurance.
Popular Types of Small Business Insurance
Office or shop insurance policies help to protect the premises of the business, the associated assets and the goods involved in the process and their storage. This is usually to do with an emergency like a fire or allied perils which covers any losses incurred due to fire and other natural disasters or accidents. Additional covers can be added to this standard policy in the form of riders such as coverage of legal liabilities, compensation for workers, theft, safety vault or cash drawer, etc.
If a business uses vehicles in its day to day operations, such vehicles must be fully insured. This will help in protecting the business against liability in case an accident occurs. The least is for a business to insure against third-party damage. However, comprehensive insurance can cover the vehicle in case of an accident. In case the employees of the business are using their cars for business, they must have personal insurance to cover such vehicles in the event of an accident. If goods or services are being delivered in such vehicles for a fee, then this has to be treated as an exception.
One can also opt for a separate insurance policy to specifically cover goods in-store or stock. Such policies are aimed to cover the stock loss due to accidents such as fire or allied perils. These policies are highly recommended for businesses which must store goods for their operations.
Liability insurance is designed to cover any legal liability that arises due to accidents in the operations of the business.
Cyber Insurance/Data Loss Insurance
Cyber Insurance is still new to Indian businesses and currently has very few companies offering them. India is one of the world’s biggest software exporters and hence is prone to cyber-attacks. Indian businesses have a lot to catch up on when it comes to cyber insurance. It helps to protect the business from liabilities arising from cyber-attacks which affect the digital assets and result in data loss.
Business Interruption Insurance
If the event of a disaster a business’s operations may get interrupted. During such times, the business may suffer a loss of income because of the inability of staff to work from the office, continue manufacturing of products or carry out sales calls. Such insurance applies to businesses that are dependent on a physical location to carry out the business. For example, retail stores. Business interruption insurance helps businesses to get compensation for any loss occurring due to pause in the business activities.
The right form of small business insurance can be helpful to avoid a significant financial loss which may arise from a lawsuit or catastrophic event. Always ask your insurer about the various forms of insurance available for your specific type of business and make plans to get those as soon as possible.