Am I Legally Required to Get Small Business Insurance?
You already know that having a comprehensive insurance plan in place is one of the most prudent investments you can make in your business. While it’s clearly a great idea, is it actually required by law? Having certain specific forms of small business insurance is in fact required in most states.
Why Your Business Needs to be Insured
A start up or fledgling business that is counting every penny might be tempted to cut corners where it can, but insurance is not the place to do it. In addition to the tremendous risk that inadequate insurance can place you in as a business owner, there are often legal requirements that can vary depending on where you live and what type of business you are in. Insurance requirements are mandated by state laws, and if you are found to be lacking then hefty fines can ensue.
It is true that many types of commercial insurance policies are optional. However, depending on where your business operates, you might be required by law to obtain:
- Professional Liability Insurance
- Workers’ Compensation Insurance
- Commercial Auto Insurance
Professional Liability Insurance
Certain professionals, such as those working in health care or real estate, may be required by state law to be covered for professional liability. Also known as “Errors and Omissions” insurance, this policy will protect you if a client or customer takes legal action against you due to a mistake or oversight made during the course of business. Even if not required for your specific profession, professional liability is a good idea to have for all sorts of consultants and business professionals.
Workers’ Compensation Insurance
If you have employees, even if they are only part-time, then you need this type of insurance in almost every state. Some states (for example, Georgia) will only require Workers’ Compensation Insurance if you have three or more employees; but this is not the national norm.
Commercial Auto Insurance
Just like insurance is required for every personal vehicle, it is also legally required for any vehicle that is owned by a business. This policy will cover you for injuries, legal costs, and property damage that may be incurred if an employee gets into a car accident.
Other Scenarios that Require Small Business Insurance
Whether required by law or not, there are many situations where having business insurance in place can be essential to your operations. Some forms of commercial insurance are often required in order for you to be eligible to sign a lease, get a professional license, or invest in certain types of high-end equipment.
You might also find it difficult to secure larger contracts with upmarket clients who require their service providers to be fully insured. It is not uncommon for clients to require professional liability insurance as a prerequisite for doing business.
Insurance Not Required by Law But Still a Good Idea
Just because state law doesn’t require certain types of insurance does not mean that it isn’t still very prudent to have these policies in place. Depending on your type of business, having a more customized insurance package can protect you again risk on a variety of fronts. The following are some of the more popular insurance options that will cover business owners in a number of unfortunate scenarios:
- Product Liability Insurance
- Cyber Liability Insurance
- Commercial General Insurance (often required if you are renting an office or commercial space)
- Business Interruption Insurance
Selecting the Right Policy for Your Business
The first step is to address the specific risks faced by your business. The type of insurance protection you need will depend on the physical premises of your workplace, the type of work you do, who your clients or customers are, what type of equipment you use, what kind of intellectual property you are dealing with, and a variety of other factors that might be unique to your business.
Limiting Your Liability
The goal, of course, is always to protect your business and your own financial interests. We have seen too many hardworking entrepreneurs go out of business due to the financial hardships associated with litigation. Having a customized insurance plan that is tailored to your specific field of work is key to protecting your business and your assets.
If you would like to explore your options for creating an affordable business insurance plan that is right for you, contact us today at NOW Insurance. One of our insurance experts can help you to tailor a plan that will protect you against the risks associated with your type of business. We also offer very competitive pricing on health and benefits coverage for you and your employees.