I’m an insurance junkie. I’m the person who calls her insurance agent to ask what line 15 on page 42 of her car insurance policy means. Because I read my policies. I won’t tell you that you should read your insurance policies because I know you won’t.
But even as an insurance junkie, I had a coverage gap: I didn’t have business insurance. When I realized it, I had a small panic attack. Then I dug in to research the topic more. This is what I found. (Don’t worry, this isn’t nearly as boring as paragraph 5 on page 17 of your renter’s insurance.)
So, What Is Business Insurance, Exactly?
Business insurance helps minimize the financial risk associated with running a business. It can cover your business for about every conceivable risk that you face. Yes, everything — from a lawsuit to an “act of God.”
Like all insurance products, business insurance has a deductible that you must pay first. Once you pay the deductible, the insurance kicks in. Most of the time, a higher deductible translates to a lower insurance cost.
These are some of the weirdest things businesses have been sued over, according to Travis Biggert, chief sales officer of HUB, a group of International insurance brokers:
- At Oktoberfest, an intoxicated person did the chicken dance on a table. He fell off, broke his arm, and sued the city! He won an undisclosed amount. Now you know where to get your next “accidental” injury!
- Convenience stores are a target. During a drive-by shooting, a person pumping gas was shot and sued the store.
- People fighting in a parking lot get injured and sued the store. Talk about misplaced anger.
- One winter, there was an icy parking lot. A man slipped, fell, and injured himself. He then sued the store for not clearing the ice, despite winter weather warnings nationwide. Convenience stores don’t have it easy!
- In a correctional facility, a day visitor and an inmate were getting cozy on a picnic table. The table broke, injuries were sustained, and the prison was sued.
- A consumer bought frozen raspberries and laid them on her kitchen counter to thaw. The package leaked and her countertop got stained. She then sued the food packaging company and ended up with all-new kitchen counters!
Bottom line: Make sure to insure your small business and leave nothing to chance — raspberry stains and all.
Insureon analyzed the top claims for small-business owners. They included theft, “water & freezing damage,” weather damage, fire, and “customer slip & fall.” Interestingly, reputational harm accounted for less than five percent of claims, but it came with a $50,000 price tag for each incident.
That makes reputational harm the costliest type of damage. Unfortunately, this is the type of damage that anyone — including freelancers — can suffer.
Types of Business Insurance
Broadly speaking, business insurance falls into five categories.
- General Liability Insurance: This covers the cost of lawsuits and payments due to personal or bodily injury.
- Product Liability Insurance: Protects against economic loss if a product you manufacture, wholesale, or sell has a defect.
- Professional Liability Insurance: Do you tend to stick your foot in your mouth? This protects you in the case of negligence, malpractice, or errors you make when providing your service.
- Commercial Property Insurance: If your company owns land, equipment, or buildings, you will need some form of commercial property insurance. Make sure that you understand what the policy does (and does not) cover before you buy it.
- Home-Based Business Insurance: Do you run your business from home? If so, your homeowners or renter's insurance may not cover as much as you think it will. My current policy covers up to $3,000 in business equipment. For a few bucks extra, I could get a rider for up to $10,000 in equipment. However, the rider wouldn’t cover inventory. I know that I said I wouldn’t tell you to read your insurance policy, but I lied. You need to see whether your homeowners insurance covers what you think it will. If you’re averse to reading, you can call your agent and ask.
You can lump all five types of business insurance into a single policy, or you can get multiple policies to meet multiple needs.
Do I Need Business Insurance?
If you run a business — even if you’re a freelancer or a consultant — you need business insurance. Thankfully, most people will find that it’s not too expensive.
As a writer and consultant, I only carry professional liability insurance. If I did more advertising, I would carry general liability insurance, too. People who sell products or have property need to think about product and property insurance.
Photographers and videographers often fall into the underinsured category because they don’t carry home-based business insurance.
Business owners with thousands of dollars’ worth of equipment need that protection. What would happen if someone stole their equipment? What if it was destroyed in a fire? Don’t lose your business prospects just because you wouldn’t pay a few bucks a month to cover your necessary equipment.
The Cost of Business Insurance
If you run a high-risk business, then business insurance is expensive, but for me, it’s cheap (around $35 per month). I love the peace of mind that comes with carrying professional insurance. For me, it’s well worth the cost.