Owning a business comes with risks, especially when that business is in trades work. You are providing in-depth services to clients and often remodeling or reconstructing major parts of their lives. It is important that you are protected in the event of an accident, injury, or disaster, so that you are not faced with handling the costs of fixing problems all on your own.
Knowing what type of insurance to get for your business can be difficult. Whatever you do, make sure to thoroughly research your options and determine the exact needs of your business.
Why do I need insurance?
The world, especially the trades world, is risky. When you are equipped with the right insurance, you will be prepared to handle that risk without facing financial ruin. Many individuals and companies will not even work with another business if they are not properly insured. In fact, checking to see if a business is properly insured is one of the first questions a potential client will ask before they sign a contract.
Insurance is essential. In some states, it is legally required to execute a job. Without insurance you could be at risk to pay for claims such as property damages and liability claims out of your own pocket. If you do not have the funds to cover this, then you could be at risk to lose your business and your personal finances.
The right type of insurance for your business starts with your business type.
Things to Consider for Sole Proprietorships
A sole proprietorship, which is also known as a sole trader, is an individual business that is solely owned and operated by one person. There is no legal distinction between the owner of the business and the business, itself.
Sole proprietorships come with amazing benefits and serious risks, especially when considering liability and insurance. When you and your business are so intricately intertwined, financial trouble for your business could mean financial ruin for you, personally. If you ever face court fees, suing, or disaster, you could be at risk to lose everything.
Thankfully, there are different insurance policies and protections for sole proprietorship owners. Consider the following:
Professional Liability Insurance Professional liability insurance, also known as Errors and Omissions Insurance, protects sole proprietor owners from lawsuits related to their business. It primarily financially protects you or other individuals, such as clients, from mistakes. When a mistake is made, instead of you having to financially rectify or reimburse with your own savings, this type of insurance will cover the costs. It will also cover legal fees if you and your business are ever taken to court.
Things to Consider for Small Businesses
Property Property insurance covers not only your building, itself, but also anything inside the building determined to be personal property that is also considered vital to your businesses operations. This could include furniture, business inventory, work materials, machinery, electronics, and more. Your property insurance could also protect you in the event of equipment breaking down, disaster clean-up, and water damage. Check your specific policy to see what you qualify for.
Liability Liability insurance works to protect your business in the event that a mistake is made and your business is proven to be at fault. This type of insurance will cover the claiming party’s losses, but it will not cover any damage to you or your business.
Business Auto If your business owns a car for operation, you will need business auto insurance. Business auto insurance works as a type of liability insurance by covering physical damage for vehicles that are used for the business. It also provides coverage to any parties that experienced loss for which your business is liable.
Workers’ Compensation If you have people that work for you then you need workers’ compensation insurance. In fact, in every state (except Texas) it is legally required that an employer provide workers’ compensation if there are more than a predetermined number of employees (this number depends on each state).
Workers’ compensation insurance provides coverage for your workers if an accident, or something similar, occurs while they are on the job. For example, if you had a worker fall off of a ladder at a job site, then your workers’ compensation insurance would cover the costs of their medical bills and lost wages. This is covered regardless of fault.
Consider these other insurance policies for your small business, as well:
Business-owners Policy (BOP) Many insurance companies offer policy packages for small businesses known as the Business-owners Policy (BOP). BOPs often combine different types of insurance coverage into one succinct package that will be sold to you as a single contract. This helps you as a business owner to keep from bouncing between countless policies, all of which you need for your business.
If there are specific risks that you think your business will have, then you can expand your BOP to include those risks under your coverage. This may be important to consider, seeing that BOPs won’t cover every aspect of your business. For example, if your business has outdoor signs or relies on e-commerce, then a BOP will not inherently cover issues that may arise with those parts of your business. You will need to expand your coverage to include it.
Business Interruption Insurance Also known as “Business Income Insurance,” business interruption insurance protects your business in the event of a disaster outside of your control, such as a fire or flood. This insurance policy will cover the costs for things such as lost revenue, daily expenses, relocation, temporary location changes, and more. It is there to help your business get back on its feet when disaster strikes and you are left with little-to-nothing.
Note: Business interruption insurance is usually part of a BOP. Check with your insurance company to confirm.
Finding the right type of insurance for your business is vital. You want to make sure that you are covered in every aspect that you deem necessary, and that neither you nor your business will suffer when disaster strikes.
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