Jan Matthew Tamanini, a Pennsylvania attorney and founder of JMT Law, LLC, concentrates her practice on working with small businesses and nonprofit corporations to give them the legal tools they require to reach their goals. She works with her clients and other attorneys to provide plain English legal documents to provide effective legal services in terms that both they and their clients can understand.
What kinds of protective insurance should a new entrepreneur think about when starting a business?
Running a business without adequate insurance is like driving without insurance. As long as nothing happens, you’re fine. But if a calamity occurs, having no insurance – or inadequate insurance – could wipe you out. Here are the types of insurance you should consider when you’re starting and growing a business:
• Business owner insurance covers both liability and property damage (including damage to or loss of personal property brought into your workplace) at and from your business. Get quotes from different insurance companies to ensure you’re getting a good price. A fire, theft, and casualty policy should cover cash-on-hand, inventory, onsite and offsite records, special office equipment, external signs and fixtures, and security systems. Analyzing your business property to determine your insurance needs is a good way to stay current on what’s required to keep your business running smoothly. Do this least annually to be sure that you’ve covered any changes to your operation, such as purchasing a major item of equipment or making a significant change to your facilities.
• “Key person” life and/or disability and business interruption insurance policies assure that your business will have the funds required to continue or to close smoothly if you become disabled or die. This is essential in a service business where clients and customers rely on your unique skill set and experience. The policy should cover everyone essential to running your business. In fact, some lenders won’t make loans to a small business unless it has key person insurance.
• If you’re in a flood plain, flood insurance is a no-brainer. Fire and casualty policies don’t cover flood damage. Plus flood insurance is relatively inexpensive, especially if you consider the costs of recovering from even a minor flood.
• If you operate out of your home, with few exceptions, your homeowner’s policy won’t cover your business supplies and equipment without a special rider. Likewise, your auto policy generally won’t cover business use of your car without a rider. Make sure your policies cover both loss of income and loss of use.
• If you have employees, you will need workers compensation insurance. Check with your state authority in to determine your options and the required coverage.
• Depending on your level of exposure, you may want to consider other special policies, such as errors and omissions, check fraud, and embezzlement insurance.
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