Five Types of Business Insurance You Shouldn’t Be Without
At Harman CPA we know that running a business in today’s economy can be tough, so it’s essential that you protect both your company and personal assets, no matter if you’re a sole proprietor or mid size corporation. One important tool is insurance. Here are five types of business insurance you need to have no matter how small or large your business is.
1. Property Insurance – If a mishap occurs at work, this policy protects your office and the assets inside it. An “all risk” policy covers losses from theft and physical damage caused by fire, vandalism, accidents, or acts of nature. It protects the building that houses your business and the items inside, such as equipment and inventory. Consider a “replacement cost” policy, which compensates you for the current costs of replacing your property, compared to an “actual cash value” policy, which replaces costs minus depreciation for past wear and tear. If you work from home, don’t assume your business is covered under your homeowner’s policy — it may not offer enough financial protection to cover your work-related equipment.
2. Liability Insurance – Hopefully, you will never be sued, but just in case a customer has issues after using your services or someone takes a spill in your office, this is an essential policy to have. It protects you if you’re held responsible for damage done to other people’s property or injuries suffered by customers. The policy should pay your legal fees, settle claims, and pay damages. If you make or sell products, focus on “product liability” insurance coverage in case someone is injured as a result of using your goods. If you’re a service-based business, get “professional liability” insurance. Similar to a doctor’s medical malpractice insurance, it is protection in case a customer charges you with harmful neglect or critical mistakes.
3. Business Interruption Insurance – Even if your business is halted by a major catastrophe, life goes on… and so do all the expenses you have to pay as the boss. Business interruption insurance pays your bills, payroll and other fixed costs if you’re forced to shut down for a period. Similar to disability coverage, this insurance ensures you still get paid based on the profits you would have earned during that time. While business interruption insurance is not sold as its own policy, you can add it onto your property insurance or an overall business owner’s policy.
4. Disability Insurance - If you’re in a business that demands more than normal physical activity, you definitely need to consider this type of insurance for yourself. Facing the sudden loss of a paycheck for any length of time can spell financial doom for your business and your family. You have several options when it comes to disability coverage which will determine the monthly cost of your coverage. When looking at any disability plan you want to make sure it covers partial disability, short term and long term, along with verifying the policy requirements for you to meet the insurance company disability qualifications.
5. Life Insurance – This is one of the most overlooked, but most valuable of coverage’s every business owner should have. No one can replace your earnings ability and all too often the focus is on the day to day expenses and not on the big picture. If you have debts, have people counting on you, then you can’t overlook the need for life insurance. With premium costs being so inexpensive at younger ages you cannot afford not to own coverage. A simple rule of thumb is to look at your earning potential based on your annual gross income plus 5% COLA times 20 years. This is a good starting point for determining a suitable face amount that you should have on your life. Remember, there will come a time when you can’t get insurance and then wish you had, so it doesn’t hurt to own a larger amount knowing you can adjust as time goes on.
For any questions please call my office (469) 742- 0283 or email me. I look forward to helping you with any business questions you have.