When starting up a new business, insurance is not always at the top of your to-do list. But it should be your biggest priority. Whilst it is not easy to know what kind of insurance you need for your start-up, you need to have a solid understanding of the risks you face and how you can mitigate these though the right kind of insurance policy. Liability insurance is one thing, but what do you know about the crucially important (and often forgotten) interruption insurance?
Even if you are a small operation, having just started up, you will require insurance. There are different kinds of insurance for businesses, ranging from business owner’s policy and commercial auto insurance to worker’s compensation and data breach (and many more). At a minimum you will require liability insurance, even if you are just a one-man company and operate from home.
Liability insurance is coverage that protects your business from financial loss in case of damage caused to a third party. This means that if you, your employees or services cause Bodily Injury or Property Damage to a third party and you are required to pay damages to the affected person, you are covered. This type of insurance is a basic requirement. It is easy to set up and can save your business from going bankrupt should any accidents happen. If your business involves heavy labor, transport or dealing with the public, this becomes especially important.
Business Interruption insurance
Most small business owners have a grasp on what liability insurance is and why it is important, but few are aware how crucial business interruption insurance is. It is often lost amongst all the other types of coverage available – and to the detriment of business owners.
Business interruption insurance covers loss of income following an unforeseen event. Unforeseen events include things like fire, floods, earthquakes, and other unavoidable natural disasters that render your company inoperable. Other unforeseen events include vandalism, civil unrest, and faulty equipment. Some business interruption insurance will be more specific and cover things like hacking or computer viruses.
The importance of this kind of cannot be overstated. Imagine that your company premises are damaged by fire. You are unable to complete orders and yet you are still paying for staff and other costs. Your reputation is damaged and you have lost most or all of your income for the time your operations are down. This could render you company unable to service its outgoings and could make you bankrupt. Business interruption insurance ensures that your income for the affected period is covered. If the worst happens, it can keep your business afloat. It will cover loss of earnings and any increase in costs in running your business as a result of the unforeseen event.
Check your Business Owner’s Policy or Property Insurance
Business interruption insurance is often included in your business owner’s policy or property insurance, but you cannot trust that it is. Check your policy to see if it is included in your contract. If not, ask your insurance provider to include it or take out a separate policy. Many business owner’s polices include this as standard, but not at all and for others it will be an optional extra. Always make sure!