If you are starting or operating a small business, you know the importance of maintaining its financial stability. Everything from managing cash flow to keeping current with tax liabilities is crucial. Another key contributor to the firm’s financial strength is ensuring your business is protected against risks. While unexpected situations may occur, you can explore insurance options to limit the impact that an unplanned event could have on your most important assets. Start by understanding your current policies, and identify areas where you and your business may be exposed to risk. The following list includes types of insurance you may want to consider:
The basics of business insurance
Among the more fundamental forms of insurance that apply to most businesses are:
· General liability: This type of insurance provides coverage for legal issues ranging from injuries on your property to claims of libel or slander.
· Product or professional liability: If your business manufactures, distributes or sells products at the retail level, this insurance protects against claims relating to product defects. The level of risk you incur depends on the types of products you sell and their potential to do harm. Professional liability coverage pertains to firms that provide services. This coverage, often referred to as “errors and omissions insurance,” protects against mistakes that could occur.
· Commercial property insurance: Just as you need insurance on your home, the same is true for your business property, even if you rent your business space. This insurance protects the valuable assets in your company from risks such as fire, flood damage, vandalism or theft.
Specialized types of insurance
Depending on the focus and state of your business, different types of insurance may be necessary. Be sure you review these options and others in your industry to determine what’s right for you:
· Business insurance for the home: If you run your business out of the home, it is likely that standard homeowner’s insurance will not cover risks associated with the business. Check your policy to see if separate or additional coverage is needed.
· Worker’s compensation: If you have employees, you will likely need to have a worker’s compensation policy in place to cover injuries or deaths that could occur while doing business.
· Auto insurance: Vehicles specifically owned by the company require full insurance. Employees using their own cars can be covered by personal insurance policies in most cases, but be sure to check with your insurer. You may need additional insurance to protect the company in case one of your employees has insufficient coverage.
· Business interruption insurance: A natural disaster or other catastrophic event could disrupt your business operation for days, weeks or even months. This form of coverage can compensate businesses for income lost during such periods. Generally, it is most suitable for a business that operates from a specific location, such as a retail store.
· Cyber or data breach coverage: If sensitive information about employees, vendors or clients is stored within your computers and other devices, there may be a financial impact if your business is subject to a cyber-attack. This insurance can help cover costs associated with notifying affected parties, public relations and legal action.
· Employment practices coverage: Employers can be subject to legal actions from employees and others, including accusations of discrimination, harassment or wrongful termination. Policies are available to protect against these costs.
· Directors’ and officers’ liability: This coverage protects individuals in positions of authority in the company if they are sued over business decisions or actions taken.
· Life insurance: If you share ownership of the business, think about what happens to the firm if one of you passes away unexpectedly. Is another owner in a financial position to purchase an additional share in the company? Life insurance can be a key part of your succession plan.
Look for solutions that are suitable
There is no “one-size-fits-all” solution when it comes to business insurance. The types of coverage you need and the size of your business can guide you in finding the best approach. Working closely with financial and insurance professionals can help you sort through your goals and determine an appropriate protection strategy.
Scott D. Serfass, CFP®, CRPC®, CDFA, CLU®, ChFC® is a financial advisor and senior partner of Serfass, Phillips & Associates, a financial advisory practice of Ameriprise Financial Services, Inc. His team specializes in helping people retire confidently and develop a plan to effectively share wealth across multiple generations. Throughout his career, he has witnessed many families continue to grow despite global and economic turmoil. This experience and research paved the way for his book, Family Success.
To contact him, visit http://www.ameripriseadvisors.com/scott.d.serfass or to purchase Family Success visit https://www.amazon.com/Family-Success-Building-Legacy-Takes/dp/1621476480
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