From procuring products to hiring employees to obtaining the proper licenses and permits, starting a business is a costly endeavor. Some new business owners are so cash-strapped by the time they are ready to launch their new company that they put off buying any of the necessary types of business insurance, sometimes indefinitely.

However, most states mandate that business owners have at least minimum insurance protection in place to protect customers and employees. Another thing to keep in mind is that some clients may require that you have certain types of business insurance before agreeing to sign a binding agreement with your company.

Types of Business Insurance

According to the Small Business Administration, the federal government requires all businesses with employees to carry disability, unemployment, and workers’ compensation insurance. If you operate your business in South Carolina, the state does not have additional insurance requirements beyond what the federal government requires.

All other types of business insurance are optional and require you to assess your own risks. Generally, you should at least carry minimum coverage for any category of expense that you cannot afford to cover on your own. Below are the most common types of optional insurance for business owners.

  • Business Income: If you cannot work due to damage to your business property, this policy provides a percentage of your income until you can work again.
  • Commercial Property: Covers damage to your physical property caused by severe weather, fire, vandalism, and other events outside of your control.
  • Cyber Liability/Data Breach: Hackers are becoming more sophisticated all the time, which means they might access and exploit private customer data. This policy covers customer lawsuits and public relations costs you incur to restore your company’s reputation.
  • General Liability: Covers a wide range of unplanned expenses, such as defending your company in a lawsuit, covering medical expenses for people hurt on your property, and cases of libel or slander.
  • Home-Based Business: Added as a rider to standard homeowners’ insurance policies, home-based business insurance covers such things as damage to business equipment and medical expenses if a client sustains injury while visiting your home.
  • Professional Liability: If you offer professional services like accounting or surgery, this policy guards against financial loss due to errors, omissions, negligence, or malpractice.
  • Product Liability: You may be liable for medical expenses if your company manufactures or sells a defective product that injures someone. Product liability insurance covers some of those claims.

Should you need more than one type of business insurance policy, ask Compass HMC about bundled savings.

How Business Insurance Protects Your Interests

The smaller your business, the more likely it is that a single customer lawsuit could wipe out your assets. Even if the customer does not sue, you could be liable for paying their medical expenses or spending a lot of time and money correcting a mistake that damaged a client’s finances or reputation.

Customers and clients also judge the credibility of a company they plan to do business with for the first time based on whether it carries insurance to protect them. The same is true of prospective employees. They not only evaluate salary and working conditions when considering a job offer, but benefits like health, dental, life, and disability insurance as well.

If you plan to apply for a business loan, most lenders require you to carry certain types of insurance to protect the bank’s investment. The same is true if you rent space to conduct business activities.

Perhaps the most important reason to obtain business insurance is for the valuable peace of mind it offers you. We invite you to contact Compass HCM to learn more about the types of business insurance we offer.