Top 5 Types of Insurance for a Small Business Owner

By Brandi Brown , last updated January 31, 2012

Are you overwhelmed by the growing to-do list you have for starting your small business? Have you read about insurance and requirements until you don’t know what to do anymore? There are dozens of types of insurance available for small business owners. While many are dependent on the industry, these five types of insurance are necessary for small business owners.

Property or Renters Insurance

This type of insurance is the most understood by business owners. Like insurance for your home, property and rental insurance covers the cost of any property damage to the building itself, but it also covers furniture, electronic equipment, and other physical assets in your space. The owners of commercial properties likely are required by law to have property insurance, and if you are renting space, you may need only to cover your office’s belongings. This insurance comes in handy if you have a fire in the building that sets of sprinklers or a customer who damages expensive equipment.

General Liability Insurance

This insurance will protect small business owners against claims for bodily injury or intellectual damage, such as claims of libel and false advertising. General liability insurance is required by law in some states, but even if it is not required, all business owners should purchase it. Unless your business is particularly dangerous, such as running a factory, this insurance typically is not very expensive. The insurance payout, however, will cover court costs, actual costs (medical bills, etc.), and even punitive damages in case of a lawsuit.

Product Liability Insurance

This type of insurance does exactly what the name suggests. It protects small business owners against claims about defects with a product. This type of insurance is needed in almost all product-related businesses, though some service business may need it as well. This insurance will protect the business owner if he or she sells something that causes an injury or illness, in many cases whether the product was defective or not.

Auto Insurance

Every small business owner will not need auto insurance, but if you think there is any chance you will have employees drive a car, you need to have an employee or company auto insurance policy. This type of policy will allow you to insure your company’s cars, rather than drivers, and you will have protection if an employee gets into an accident. Should your new business require a significant increase in driving for you, getting an upgraded policy may be a good idea.

Business Interruption Insurance

This type of insurance is less well known, but is vital if you believe there is any possibility of something causing long-term harm to your business interests. This type of insurance will protect you in a natural disaster if your business cannot continue while repairs are made to the building or the area is made safe. Business interruption insurance also can assist you if your building catches on fire, requires significant maintenance, or is otherwise unworkable. Small business owners in areas commonly hit by natural disasters and in communal buildings need to get this insurance to protect themselves.

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