Coverage Needs for Small Businesses

So -- you're a new business owner. You've developed your business and marketing plan. You've leased office space. You're hiring employees...and furniture...and equipment. What else? Oh yeah -- insurance.

What types of insurance coverages does a small business owner need in order to be adequately protected?

1. Property Insurance: Property insurance covers the cost of losses such as fire or theft, including personal property (furniture, inventory, raw materials, machinery, computers, etc.). The policy may also provide compensation for a business recovering from a catastrophic loss.

2. Liability Insurance: Liability insurance pays for damages when a business is found liable third-party injuries or mishaps, up to the limits of the policy. It will also pay for attorneys’ fees, other legal expenses and the medical bills those injured by, or at your business.

3. Commercial Auto Insurance: Then business auto insurance policy pays any costs to third parties resulting from bodily injury or property damage where the business is legally liable, up to the policy limits.

4. Workers' Compensation Insurance: All states but Texas require employers to maintain workers' compensation insurance when they employ a certain number of employees. Workers' comp insurance pays for medical care and replaces a portion of lost wages for an employee who is injured in the course of employment, regardless of who was at fault for the injury.

5. Errors and Omissions Insurance/Professional Liability: This coverage will pay the cost for any judgment for which the insured is legally liable, up to the policy limit. E&O/professional liability insurance is intended for those who are in the business of providing advice or services to customers, such as insurance agents, attorneys and doctors. It also provides legal defense costs, even when there has been no wrongdoing.

6. Employment Practices Liability Insurance: Employment practices liability insurance provides coverage for an employer who is found to have violated an employee’s civil or legal rights. The policy also provides legal defense costs, which can be substantial.

7. Directors and Officers Liability Insurance: This coverage protects directors and officers of corporations or non-profit organizations if there is a lawsuit against the firm for mismanagement. The policy will pay any judgment for which the insured is legally liable, up to the policy limit. It also provides for legal defense costs, even where there has been no wrongdoing.

8. Key Employee Insurance: This policy provides life or disability income insurance that compensates a business when certain key employees die or become disabled.

9. Umbrella Policies: These policies provide coverage for limits above a company’s other liability coverages. It is designed to protect against unusually high losses, jury awards, etc.