Small Business Owner Insurance Needs

Entrepreneurs have unique needs when it comes to purchasing insurance policies. The types of insurance needed vary based on the type of business being operated. Additionally the business owner needs to purchase insurance that relates to the operation of the business as well as purchasing insurance to cover family-related issues.

Here is a breakdown of the types of insurance policies a business owner should discuss with his insurance agent:

• Errors and Omissions/Professional Liability Insurance: This type of insurance protects the professional in his or her dealings with the public. The professional liability policy protects the insured against any financial liability incurred based on a claim that alleges an error in performing a professional service. As an example, a professional speaker may be sued by the agency that hired him if it feels he did not perform up to its expectations.
• Property Insurance Coverage: A policy that insures the business property will indemnify the owner of that property in the event of its loss or the loss of its income-producing capability. The loss could occur because of a covered event that may include explosion or fire.
• Business Auto: This policy provides coverage on the vehicles used in, or by, the business. The owner of the business will have to provide the insurer information on all of the potential drivers of the autos the business owns and operates.
• Business Overhead Expense (BOE): If the business owner becomes disabled, the expenses to keep the business operational will not cease. A BOE policy will reimburse the policyholder for business expenses that are incurred during the period of disability. Some of the common expenses covered under the Business Overhead Expense include: property taxes, utility bills, rent, lease or mortgage payments, and accounting and legal expenses. The premiums on this policy are a tax-deductible expense. BOE policies provide the business owner and its employees’ peace of mind as it assures business continuity.
• Worker’s Compensation: The business owner purchases the worker’s compensation insurance policy under which he agrees to pay benefits to an insured employee if the employee is injured while in the performance of job duties. The policy requirements vary by state.
• Key Man/Person Insurance: The business owner may purchase a life and/or disability insurance policy on the life of the business’s key person. A key person insurance policy helps offset negative impacts the business may suffer in the event of the disability or death of the key person. In many cases, the business owner will have to prove to the insurance provider the reason the key person insurance is needed.
• Group Health Benefits: A business owner may offer a health insurance package as a way to attract and retain employees. The policies provide coverage for health, dental, vision, and short- and long-term disability. These policies can be structured in many ways with the employer paying all or part of the premiums.
• Buy-Sell: A buy/sell insurance policy is one made between the principals of the business. The policy offers the surviving business owner the capital to purchase out the ownership of the deceased or disabled business partner.
• Directors or Officers Insurance: Many entities purchase a directors or officers insurance policy as a protection against claims filed. In this case, the directors and officers are typically protecting themselves against employees or stockholders and the usual claim arises when the stockholders or employees allege financial mismanagement.

The type of insurance policy your business needs will vary based on the location of the business, as some policies are required by law, and by the type of entity.