Do I Need Business Insurance?

Photo Courtesy: Mohamad Faizal Bin Ramli/iStock

Whether you currently own one of the 33.2 million small businesses that operate in the United States or are considering launching a company, it’s normal to wonder if business insurance is a genuine necessity. A single policy can run from $ 14 to $124 per month, and since there are different types of business insurance, you might need several policies to cover all of your bases. That’s a significant investment, especially for a new company.

However, business insurance also provides a significant amount of value. It gives you a financial safety net, making it easier to navigate challenging and costly situations. If you’re wondering, “Do I need business insurance?” here are a few things worth knowing.

Is Business Insurance Required Where I Live?

Generally speaking, most types of business insurance aren’t required by law. But there are a few exceptions. For example, workers’ compensation insurance is mandatory if you have employees, and professional liability insurance is required if you work in specific professions. If your business owns a vehicle, laws generally make commercial auto insurance non-skippable, and alcohol sellers need liquor liability insurance in many states.

Ideally, you want to check local mandates to determine whether there are any business insurance requirements that apply to your company. That ensures you can arrange for the required coverage quickly, making it easier to avoid issues later.

What Types of Business Insurance Should I Consider?

While there are many types of business insurance, an easy place for more people to start is a business owner’s policy (BOP). A BOP is essentially a bundle of other kinds of business insurance, namely general liability, commercial property, and business interruption.

General liability insurance covers harm to others, such as injuries or property damage relating to accidents. Commercial property policies ensure your equipment, inventory, materials, and other physical items are covered for a range of situations, including fires and theft. Business interruption insurance gives you a financial safety net relating to unexpected temporary closures or similar scenarios.

Along with a BOP, workers’ compensation insurance is a necessity if you have employees. Similarly, commercial vehicle coverage is a must if your business owns a car, truck, van, or SUV, and you might need professional liability insurance depending on your industry and field. Finally, if you sell physical goods, product liability insurance is a wise addition, as it provides coverage if a third party is harmed by the items you create.

Tips for Evaluating Policies

When you’re evaluating policies, focus on coverage levels, required deductibles, claim processing times, and company reputations. That helps you determine how the various options are alike and where they stand apart. After you’ve made that assessment, you can then examine the price of premiums.

The goal isn’t to find the cheapest option. Instead, you want a competitive premium with a manageable deductible on a policy that offers significant value. By examining the situation from that perspective, you ensure you’re getting the level of coverage you’re after at a reasonable price, all from a company you can trust when times are difficult.