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What types of insurance does your small business need?

On Behalf of | Dec 30, 2022 | Business Formation & Planning |

No matter what, operating a small business comes with a certain amount of risk. Accidents happen, and you may one day be faced with some kind of claim against your company.

Creating your new business as a corporation or a limited liability company can help insulate your other assets from claims related to the business but it is still essential that the business obtain the correct insurance as well.

Depending on the nature of your business and how many people you employ, you may be legally required to carry certain kinds of insurance, like workers’ compensation. Even if you’re not obligated to get insurance, however, it can prove invaluable for more than one reason. 

Why is insurance so important to the future of your business?

First, insurers aren’t exactly eager to pay out claims, so they can help you minimize your risks through security and safety audits. Second, when you do encounter a problem, your insurance company will often handle all negotiations and your defense for you (including legal fees in defending your company from claims) – and that can save you a lot of money and frustration. Finally, if you do have to pay a claim, the insurance can protect your bottom line.

So, what kind of insurance do you need to consider as you start to formalize your business plans? Consider these, for starters:

  • General liability insurance: If a customer falls in your store or a competitor alleges that you defamed them, this is the insurance that would step in and cover your legal defenses and any settlement.
  • Business income insurance: Could you afford a temporary interruption in your business if there was a natural disaster or a fire in your building? Most businesses could not. This insurance is the kind that can step in and provide replacement income.
  • Key person insurance: Are you starting your business with a partner? If something happened to either of you, what would happen to the business? Key person insurance can provide a safety net if one of the important players in a business is suddenly unable to work.

These are just a few of the available options. Understanding how to plan for potential problems is all part of getting your company off the ground. Experienced legal guidance can help you make sure that you have the coverage you’re required to have, and the coverage you need to thrive.