You know how important it is to maintain financial stability when you start a business. It is important to manage cash flow and keep current with tax obligations. Your business’s financial strength can also be affected by how well you protect it against potential risks. Unexpected events may happen, but you can look into insurance options to minimize the damage that such an event could have on your most valuable assets. Begin by reviewing your existing policies and identifying areas that could expose you or your company to risk. Here are some types of insurance that you might want to consider.
Basics of business insurance
The following are the most basic forms of insurance that can be used by businesses:
* General Liability: This type of insurance covers legal issues, from property damage to claims of libel and slander.
* Professional or product liability: This insurance covers your business against any claims related to product defects if it manufactures, distributes, or sells products at retail. The type of products that you sell and the potential for the harm they cause will determine how much risk you take. Firms that offer services will be covered by professional liability. This coverage is often called “errors and Omissions insurance” because it protects against any mistakes that might occur.
* Commercial property insurance. Just like you have insurance for your home, you also need insurance for your business property. Insurance protects your company’s valuable assets from fire, flood damage, and theft.
Insurance that is specific to your needs
Different types of insurance might be required depending on your business’s focus and current state. These options, as well as others in the industry, can help you decide what is right for you.
* Homeowner’s insurance that covers business risks: It is unlikely that standard homeowner’s insurance will cover the risks associated with your business. To determine if additional coverage is required, check your policy.
* Workers’ compensation: You will need to have a policy for worker’s comp if you have employees. This policy can cover any injuries or deaths that may occur in the course of your business.
* Auto insurance: Only vehicles owned by the company are covered. Personal insurance policies can cover employees who drive their own cars. However, it is best to consult your insurer. In the event that one of your employees is not covered, you may need to purchase additional insurance.
* Business interruption insurance: If your business is disrupted by a natural disaster or another catastrophic event, you could lose your livelihood for days or weeks. This coverage will compensate businesses for lost income during these periods. It is best for companies that operate from a particular location, such as a retail shop.
* Cyber and data breach coverage: If sensitive information regarding employees, vendors, or clients is stored on your computers or other devices, it could have a financial impact if you are the victim of a cyber-attack. This insurance covers costs such as notifying the affected parties, public relations, and legal action.
* Coverage for employment practices: Employees and others can bring legal action against employers, including allegations of discrimination, harassment, or wrongful termination. These costs can be protected by policies.
* Directors’ and Officers’ Liability: This coverage covers individuals who are in authority within the company in case they are sued for business decisions or actions.
* Life insurance: If your share ownership of the company, consider what happens to it if you die unexpectedly. Is there another owner who is able to buy an additional share of the company? Your succession plan can include life insurance.
Find solutions that suit your needs.
When it comes to business insurance, there is no one-size-fits-all solution. You can determine the type of coverage you require and the size of the business to help you choose the right approach. You can work closely with insurance and financial professionals to help you determine the best protection strategy.
Scott D. Serfass, CFP (r), CRPC (r), CDFA, CDFA(TM), CDFA(TM), CDLU(r), CHFC(r), is a senior partner at Serfass, Phillips & Associates, a financial advisory firm of Ameriprise Financial Services, Inc. He specializes in helping people to retire confidently and create a plan that will effectively share the wealth with multiple generations. He has seen many families thrive despite economic and global turmoil throughout his career. His research and experience led to his book Family Success.