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Different businesses have different coverage needs when it comes to insurance. It's wise to learn about which type of small business insurance to purchase. — Getty Images/ dpVUE.images

In our Startup2021 series, we're helping aspiring entrepreneurs navigate the new business climate of the COVID-19 era. Each week, we'll share an in-depth look at one step you can take toward launching your business in 2021.

Getting insurance to cover your small business is an important part of starting a business. You want to make sure you're properly protecting your company and your assets, as well as avoiding out-of-pocket claims.

Different businesses have different coverage needs when it comes to insurance. Here's why you need to invest in small business insurance, and some of the most common types to consider.

[Read: Startup 2021: How to Trademark Your Business Name]

What is small business insurance?

Small business insurance, also known as commercial insurance, offers protection for your business’s property, finances and assets. The most common small business insurance is a business owner’s policy (BOP) that bundles insurance coverage for a wide array of situations.

Small business insurance is crucial to have, as it can reimburse you for natural disasters or other losses. Additionally, small business insurance protects your business during a data breach or if an accident occurs resulting in bodily harm.

What does small business insurance cover?

Depending on the type of small business insurance you obtain, there are a number of situations small business insurance covers, including:

  • Financial losses from incidents, such as a break-in or employee looting.
  • Property losses due to floods, storms, fires or other natural disasters.
  • Expenses from data breaches, including costs to inform affected customers.
  • Liability coverage when an employee becomes sick or injured on the job.
  • Coverage for interruptions your business accrues during a covered peril.
  • Protection if claims are made against your business for the goods or services provided.
  • Expenses needed to replace or repair equipment damaged during a covered peril.

As time goes on, your business’s needs may change. For example, you may need to switch insurance carriers or add more coverage, based on a new environment if your business moves.

Types of small business insurance

General liability insurance: Suitable for all small businesses, this insurance protects your business in the event of bodily harm due to the business location or property damages. It also helps protect against slander and medical expenses due to injury and libel.

Product liability insurance: For businesses that sell a product, product liability insurance helps cover any legal costs when your business’s product has caused harm. This is also known as errors and omissions insurance.

Professional liability insurance: Similar to product liability insurance, professional liability insurance covers businesses that provide a professional service such as massage or financial assistance. It helps protect against harm caused by services provided.

Business income coverage: This insurance covers expenses and losses that occur during a covered incident, such as a restaurant having to close down due to flooding.

Commercial property insurance: For businesses with physical property, this insurance helps to protect your business’s property, equipment and furniture against theft or natural disasters.

Workers’ compensation insurance: For businesses with employees, this coverage is legally required in many states and covers businesses when employees become sick or injured at work.

Home-based business insurance: Suitable for businesses that run out of the owner’s personal property, home-based business insurance is typically added onto an existing home insurance policy to include protection for business equipment or injuries that happen to customers within the home.

Business owner’s policy (BOP): This insurance bundle is typically the most popular form of insurance for small businesses. It combines general liability insurance, property insurance and business income coverage into one policy, which can cut insurance costs.

[Read: Does Your Small Business Need Cyber Insurance?]

Tips for buying business insurance

  • Assess your risks: Determine the kind of coverage your business requires. If you have employees, for example, you’ll most likely need to hold a worker’s compensation policy. Additionally, if you live in an area with frequent natural disasters, it’s important to have commercial property insurance or business income coverage.

  • Find a licensed agent: If you’re unsure about which policy to choose, an insurance agent can help you determine the needs of your business and the policy that suits it.

  • Shop around: Read reviews, compare rates and get opinions from other small business owners on their insurance carrier. It also helps to contact multiple insurance companies and their agents to ensure you’re receiving the best coverage and rates for your business.

  • Reassess regularly: As time goes on, your business’s needs may change. For example, you may need to switch insurance carriers or add more coverage, based on a new environment if your business moves.

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

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CO—is committed to helping you start, run and grow your small business. Learn more about the benefits of small business membership in the U.S. Chamber of Commerce, here.

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Published July 12, 2021