As an independent, locally owned firm, we have had the opportunity to learn about insurance needs first hand. While daunting at times, even for us who help advise others on insurance requirements, once a plan is in place we can personally attest to the peace of mind that it brings. Many small business owners wear many hats. While their roles likely started as the producer of their product/service, it evolves to also leading the marketing efforts, sales department, accounting, HR, administration, etc. Some are fortunate to be able to bring on others to support these areas but many may only have one or two other employees.
To many small business owners, their business is the most valuable asset they have. It is the lifeline for their family and their future income. Due to large insurance company marketing, many are very familiar with life insurance but less know about the other insurance coverages that might protect their business and/or family in case of the unforeseen event. Additionally, for many small business owners, their business is their passion and their baby; the last thing they want to see happen is for the business to go away, if the unforeseen occurs.
While there are many different types of insurance coverages that might make sense for a small business owner, the coverages below are the most popular and likely affect the most amount of people. This is certainly not an exhaustive list.
· Buy/Sell Insurance – Probably one of the most overlooked insurance policies in place but likely one of the most important. A buy/sell policy likely will include an agreement stating that if a key owner and/or employee dies or becomes disabled, another person will agree to buyout the disabled or deceased person. The payment comes from the insurance policy and allows the owner’s family members to likely receive a higher payout. This is potentially achieved by allowing the parties involved to negotiate with rational minds prior to an unforeseen occurrence happening and it protects against a “fire sale” of the business.
· Key Man Insurance – Sometimes a business may have a key non-owner person who is imperative to the success of the business. This may be a COO, key salesman, or other important operator of the business. A key man policy provides assets if the key person becomes disabled or dies. It allows the business to continue with uninterrupted income while the leadership determines how to move forward after an unforeseen change. This can be incredibly important in businesses where margins are thin and/or it would be difficult to retain staff, make expense payments, etc. if a disruption occurred.
· Liability Insurance – If you run a business, there is no way around acknowledging that you may be liable for a future claim. We are all human and even the most genuine humans make mistakes. It is imperative that a business owner have liability insurance for their business. This can look very different per industry, however, most include a general liability insurance policy (including an umbrella policy) and one of the following: product liability, professional liability (errors and omissions), property liability, malpractice, and/or home-based business insurance.
· Worker’s Compensation – An often overlooked coverage for startup ventures is Worker’s Compensation. This provides insurance to employees who are injured on the job. State laws vary but to our knowledge most states, if not all, require employers to maintain workers compensation if the business has W2 employees.
· Cyber Security Insurance – In the digital age in which we live, cyber threats are one of the most threatening disruptions to businesses. While determining what exactly cyber security insurance covers is difficult, if your business maintains critical information, it would be worth reviewing.
· Automobile Insurance – Remember, if you are using your auto for business use, your personal vehicle insurance likely does NOT cover you while driving for business.