Here’s how to make sure your business is properly protected

If you own 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 to ensure you’re able to keep your company profitable and in compliance with the law. 

But even businesses with pristine balance sheets can be impacted by events outside their owners’ control. Accidents, natural disasters, lawsuits and cybercrime are just a handful of risks that threaten to undermine the financial health of today’s small businesses. That’s why it’s imperative that the entrepreneurs running them have proper protections in place. 

If it’s been a while since you’ve reviewed your company’s insurance coverage, putting it off longer could leave your business susceptible to significant risk. Fortunately, there are steps you can take today to safeguard your company and your livelihood. Here is a primer to get you started.

First, understand the basics of business insurance

Different types of insurance can provide different protections for your business. Some of the more common types include:

• General liability: This type of insurance provides coverage for legal issues ranging from injuries on your property to claims of libel or slander. 
• Product liability: Product liability insurance can provide protection against claims relating to defects in the products you manufacture or sell. The level of coverage you would need to cover your risks will depend on the types of products you supply and their potential to do harm. 
• Professional liability: 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 can protect the valuable assets in your company from risks such as fire, flood damage, vandalism or theft.

Specialized types of insurance

Beyond the basics, there are specialized types of insurance that can provide coverage for the unique aspects of your business. Consider whether any of these apply to your situation:

• Business insurance for the home¹: If you run your business out of your home, it is likely you’re your 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 might happen to the firm if one of you passes away unexpectedly. Life insurance can be a key part of your company’s succession plan, ensuring the deceased’s loved ones and the surviving partners are taken care of financially and the business can continue to operate.

Look for solutions that are suitable

As you can tell from the plentitude of options described above, there is no “one-size-fits-all” solution when it comes to business insurance. Working closely with financial and insurance professionals can help you assess your needs and determine an appropriate protection strategy.

Jean D. Koehler, CLTC®, CRPC®, RICP®, CKA®, is a Financial Advisor with Ameriprise Financial Services, LLC. in Arcadia. She specializes in fee-based financial planning and asset management strategies and has been in practice for 21 years. She is also the winner of the 2020 Ameriprise Client Service Award. To contact her, please visit her website at https://www.ameripriseadvisors.com/jean.d.koehler/ or call her office at (626)254-0455. 55 East Huntington Drive Suite 340, Arcadia California 91006.

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