Many small business owners ask us the same question, “Do I need business insurance?” The answer is always the same, “YES!” The bottom line is that every company needs business insurance. But many business owners don't believe that. In this article, we debunk some of the common business insurance myths and misconceptions. We also help you think about the types of insurance you may need for your business.
Myth #1: My Business is Too Small to Need Insurance
Myth 1 says "I don't need insurance, I'm just running a small business." The size of your business only determines the amount of coverage you need—it doesn’t mean you don’t need insurance. Every business faces risks, you simply need to determine what yours are to determine what insurance coverage you need.
Myth #2: A Business Insurance Policy is Too Expensive
Myth 2 is that business insurance is far too expensive. Sure, business insurance isn’t free—but it is well worth the money you spend. Let’s just look at a few things that could bankrupt your business:
- A tornado destroys your storefront and you don’t have property insurance. It will cost thousands of dollars to repair the damage—and you don’t have the money.
- Someone slips and falls in your store but you don’t have general liability coverage. They sue you for their injuries and you can’t afford the settlement cost. It bankrupts you personally and professionally.
- One of your employees falls off a ladder and breaks their arm. They sue you for an unsafe working environment. Unfortunately, you don’t have workers’ compensation to cover this claim. You spend the next 10 years paying the settlement.
- Your business had to shut down for two weeks during the Coronavirus pandemic to refit your store to fit CDC guidelines. If you had business interruption insurance, it would've helped cover payroll, taxes, and other operating expenses.
No one thinks that any of these things will happen to their small business. But the unthinkable does happen. The cost you pay for the right business insurance can mean the difference between running a business you love for life—or having your dreams shattered. A great insurance agent will help you find affordable insurance to cover the risks you face.
Myth #3: My Homeowners Insurance Will Protect My Home-Based Business
Some home insurance policies will cover a specified dollar amount for business-related claims. However, if you run a business from your home or have a home office, you should consider obtaining specialized coverage for greater losses. If a fire destroys your home, the thousands of dollars of inventory or business equipment stored in your garage may not be covered by insurance companies. Check with your insurance to find out what coverage you do have—and supplement it if necessary.
Myth #4: General Liability Covers All of My Risks
While it can be easy for small business owners to get general liability insurance and “Call it good,” this isn’t the right move. A general liability policy is comprehensive, and the insurance protects from liability for third-party bodily injury, property damage, or advertising injury. However, there are quite a few circumstances in which your general liability insurance doesn't apply.
General liability insurance won’t cover an employee who gets injured at work. It doesn’t apply if you get sued for faulty professional advice. It also won’t cover your property if it is damaged or destroyed. The bottom line? General liability is NOT a one-size-fits-all policy.
Myth #5: Personal Auto Insurance Will Cover Business Use
Yes, your personal auto insurance policy will cover you when you’re commuting to work or grabbing lunch at a nearby cafe. But most personal auto insurance policies exclude coverage for accidents that occur while you are conducting business. So if you’re making deliveries, driving to a consultation, etc.—you may need to check with your auto insurance agent to see if you’re covered. If your business owns box trucks, semis, or other vehicles—getting commercial vehicle insurance is a given.
Myth #6: Errors and Omissions Insurance is Only for Doctors
Yes, doctors and other medical professionals need malpractice insurance. If you and your business give any kind of professional advice in the course of your work, you’ve opened yourself up to lawsuits. One error in architectural plans can lead to a collapsing wall. If you don’t complete a project on time you can be sued for not completing your contractual obligations. In all these instances, errors and omissions insurance protects you from liability (i.e. professional liability insurance).
Myth #7: I Don’t Need Workers’ Compensation Insurance
Did you know that three states require you to buy workers’ compensation insurance—even if you don’t have employees? New York, Nevada, and Utah. Other states, like Texas, don’t require it at all. Why should you consider it? Workers’ compensation protects your employees if they get injured at work. If they can’t work it can help pay their lost wages and medical expenses. Lastly, in most cases, when an employee agrees to workers’ compensation they agree not to sue the business for any accidents that may occur. This protects you as the small business owner.
Myth #8: My Small Business Won’t Be Targeted for a Cyber-Attack
Small businesses are actually frequently targeted by hackers. Why? Because you likely don’t have the necessary security measures in place to protect your data. Cyber liability insurance can help you recoup losses after an attack. They can help notify affected customers, provide them credit-monitoring and identity theft protection, and even help pay ransoms.
Myth #9: You Don’t Need Property Insurance Coverage
Sure, it doesn’t make sense for some businesses to obtain business property insurance—especially if you operate your business solely online. But what if you’re a contractor solely operating at a client's home or other projects? You may think their homeowner's insurance covers you if you damage their property or accidents happen. That’s not always true. Their insurance company may come after you for restitution. If you don’t have property coverage—that could be coming out of your pockets.
FUN FACT: Did you know that property insurance doesn't cover flooding? If you live somewhere prone to heavy rain or hurricanes, protect your property from flood damage with flood insurance.
Myth #10: My Umbrella Policy Has Got Me Covered
There is an errant insurance myth that your umbrella policy will cover everything your general liability insurance won’t. While it’s true that an umbrella policy can help cover things that are excluded from underlying policies or help cover anything beyond your policy limits, it doesn’t cover everything. You need to know exactly what your umbrella policy covers—or you could be left in the lurch.
Let Us Help You Get the Right Business Insurance Today
Hopefully we helped dispel some of the common business insurance myths. But now you’re probably thinking, “Where do I start? What business insurance policies do I need?” We’ve got you! If you’d like to speak with a knowledgeable agent about getting insurance quotes for your small business, give us a call! Or complete the form at the top of the page. We’d be glad to help you protect your small business.