Avoiding the four pitfalls of insuring your small business
By Guest Contributor, Chris Hayes | Founder and principal, The Hayes Agency
Running a small business, particularly one in the startup phase, can be overwhelming at times. In addition to doing what you do best (your core business), you are responsible for handling a litany of necessary administrative functions, including but not limited to recruitment, payroll, taxes, facility management and insurance – all of which can be complex, confusing and costly if misunderstood.
Insurance is necessary for all businesses, and certain types of insurance are legally required. Keeping a handle on the latest requirements, available policies and cost effectiveness, however, can quickly become like a second full-time job – a commitment no small business owner really has time for.
By exposing the issues and areas that create the most vulnerability for the small business owner (SBO) related to insurance, it equips us to make better-educated decisions and to protect ourselves with a more tightly knit security blanket for our businesses.
Pitfall No. 1: A landlord’s insurance policy does not cover against theft, fire or water damage of your contents
Many SBOs forget to cover the contents of the building that they own or lease. A landlord’s insurance policy will not cover against theft, or fire or water damage, of your contents. If you rent or own a building, your landlord or mortgage provider, respectively, may require you to obtain property coverage.
Pitfall No. 2: Little to no safety net in the event of a lawsuit
We live in an increasingly litigious society. One mistake or accident could sink a small business without the proper coverage. General and professional liability policies are musts for all business owners. While the conventional wisdom is that insurance is expensive, many SBOs are pleased to discover that bundled policies are actually quite affordable. Some of our clients are able to combine their general liability, property and possession coverage into a Business Owners Policy (BOP) for around $150 a month.
Pitfall No. 3: The maze that is health care
Health care coverage is crucial for SBOs and a valuable benefit for recruiting and retaining staff. Understanding health care coverage, however, is intimidating, particularly in the face of the substantial reforms currently affecting companies. The new health care laws taking effect require some small businesses to offer health care policies to their employees, or pay out of pocket for coverage. Consulting an insurance professional who specializes in health care for small businesses is well worth the effort.
Pitfall No. 4: Not protecting your biggest asset – yourself
In the spectrum of “what ifs” that go along with running a small business, many owners discount the importance of short- and long-term disability policies. This is the most overlooked coverage for SBOs but can be the most devastating for owners if, for some reason, they are suddenly unable to work.
Everyone values life insurance, but only 13 percent of SBOs protect themselves or their businesses with disability insurance. The statistics are sobering: working adults are four times more likely to become permanently disabled than to die early.
Personal disability policies must be paid from individual accounts, whereas the company can pay for business overhead. An own-occupation policy pays you in the event that you can no longer perform the duties of your current profession.
Key Man Life Insurance is another policy that every SBO should consider. This policy protects you and your business in the case of a fatal accident or illness. It can pay off any liens held against the business and allow your heirs additional funds and time to make important decisions with regard to the continuation of your company. Banks now require this coverage for most small business loans.
Bottom line:
Insurance is important, and can make or break any company, large or small. Being adequately protected is an investment worthy of time and resources.
If you have fallen into any of the pitfalls above, you are one of many. Find an agent you trust, who has access to the best variety of providers, and map out a plan for your business today.
