One of my favorite things about living in a small town with big amenities is the volume and range of small businesses. Every day we have locals calling in to set up their insurance for a new venture. Hearing their creativity, ambition, and entrepreneurial spirit inspires us . I see these business owners setting off with excitement and trepidation just like our kids are doing when we take the training wheels off their bike. By the time you start your business, you’ve already honed your skills and are ready set off. Your hobby and side projects were the training wheels that helped you learn your skills, now it’s time to get into motion.
Before our kids can learn to balance or steer, we teach them about the importance of your helmet and how to fall off your bike properly. Insurance is your helmet when things go wrong and it’s vitally important to your business. Whether you’re just starting out cementing your hobby into a business plan or fine-tuning operations for hundreds of employees, your insurance needs are all going to be different and complex.
Taking the most popular and important questions we encounter; we’ve summarized the types of coverages you should consider when starting a business. There are four main types of insurance we recommend when you are just starting out:
- General Liability or Professional Liability
- Workers Compensation
- Life Insurance
- Business Auto Insurance
General Liability insurance can be called slightly different things depending on your industry but is the most common starting point for most businesses. This coverage deals with potential injuries or damages to other people or their stuff. It is intended to cover sudden and accidental injury or damage to something not in your care, custody, or control. For example, if a painter is working on the exterior of a home and the gutters fall off onto a car, the painter’s insurance could cover the damages to the car but maybe not the gutters.
Professional Liability is coverage for things you say or advise rather than the more physical operations covered under General Liability. Typically, this is a primary coverage for professionals like engineers, realtors, directors & officers, accountants, insurance agents, lawyers, doctors, etc. It is usually quite specialized and tailored to your field, something you want specially fitted to you and not something you want to buy off the shelf.
We recommend getting one million in coverage starting out, this is usually the sweet spot for value where premium amount and coverage meet.
Workers Compensation covers accidents that happen to you or your employees while on the job with; common incidents involve motor vehicles, falls, cuts, and back strain. If you start off as a one-man/woman operation, Workers Comp may feel like an unnecessary expense. Luckily, depending on your trade and how you set up your business (LLC, Corp, Sole Proprietor) you can exempt yourself from this coverage and save on premium. Businesses can additionally exempt up to four co-owners if they have at least 10% share in the business. In Florida, non-construction industries don’t require Workers Compensation until you exceed three employees, and many are tempted to avoid getting this customer. We recommend getting this coverage no matter your company size because the average workers compensation claim costs around $40,000, a hefty burden for small businesses to bear. Workers comp companies also act as your advocate in workplace safety and training, providing materials and resources to assist you.
Life Insurance and disability coverage are important for your family in the event of death or an accident that renders you unable to provide an income for your family. Many large employers provide this to employees but once you go out on your own it now falls on you to provide this security to your family. No one likes to think about that situation, but it’s even more unbearable to think about your family not having the income to provide for their needs. We generally recommend starting at around $1 Million for business owner but even a small $50,000 policy would be enough to cover burial expenses.
Business Auto seems to be a gray area when you’re just starting out. If your car is registered and owned in the business name, it’s time to switch it over to a Business Auto Policy. If you use your personal vehicle for work, be sure to add “business use” on your personal policy. If it has logos on the side, job materials in the back, and an employee or client in the passenger seat, you’re probably better off moving it to a business policy.
With these coverages acting as padding for the pitfalls of business ownership, you’ll be riding down the path of success. Once you’ve mastered the startup business, you’ll move up to a more specialized operation. Like a twelve-speed bike on a highway, your business will encounter new risks, but also greater speed and momentum. If you’re smart and driven enough, like an electric bike, you can advance further to a business that can traverse a vast country. The categories of middle and large sized businesses will each require new and additional sets of coverages that will help with your long-term speed and efficiency.