By Sarah Mueller
Insurance for small businesses comes in many forms, and with so many factors to take into account, many business owners find it challenging to get the coverage that caters to the needs of their operations. That is understandable, especially since there are many common insurance myths that can make the process even harder. What should be covered? Do business owners need to get only one comprehensive insurance policy? Are brokers needed when buying small business insurance?
To ensure that your business will be protected against possible claims, it’s important to know that not everything you think about business insurance is true. Here are some of the biggest myths you shouldn’t believe.
Myth #1: Home insurance protects home-based businesses.
One of the common misconceptions is that having home insurance is enough to protect the home-based small business. As the name implies, the existing policy only applies to the home. Even though it can provide a bit of coverage and can allow business owners to get some add-ons for the business, it is advisable to buy proper business insurance—one that specifically meets the needs of the home business to ensure that your business operations will be protected against any claim.
Myth #2: General liability covers all possible risks.
Some business owners believe that general liability insurance is a one-size-fits-all solution for all risks related to their operations. True, it provides comprehensive coverage, but bear in mind that it will not protect the business from every claim that may come up.
In general, this type of insurance is designed for protecting business owners from lawsuits filed against them by someone who does not work for the business. Business owners with general liability insurance are protected against instances when there’s an injury or an accident that occurred within the operations, damages to property, and even damage to reputation.
Myth #3: Workers’ compensation insurance is not necessary if there are no employees.
Many think that they don’t have to carry workers’ compensation insurance since there’s no one employed in the business except the owner. This is not always the case. The location of the business plays a role in this aspect. States implement different laws and regulations when it comes to this type of insurance. Even sole proprietors may be required to get workers’ compensation insurance.
Mandated coverage varies by state and factors such as the number of employees, classification of the workers, as well as the nature of the business all determine the coverage needed. For instance, business owners may not need to carry workers' compensation insurance if they have contractual workers. However, they will be required to get one if they have employees who are working full time or part-time. Make sure to talk to an insurer to determine the coverage applicable depending on the location of the business.
Myth #4: The existing insurance will cover damages due to flooding.
Another common misconception is that the business will be protected by the existing insurance against damages due to flooding. This is not true since the flood that the insurance refers to is the typical water damage caused by an overflowing sink or a problem with the sewers. Insurance coverage does not necessarily cover flood damage.
Business owners need to get it as an add-on to the existing business insurance to ensure coverage for damages due to flooding. If the operation is located in an area that is considered high-risk for flooding, it is essential to get comprehensive coverage with commercial flood insurance. Otherwise, the standard coverage will suffice, and it doesn’t cost a lot.
Myth #5: Business owners do not need to get another insurance when personal vehicles are used for business.
Auto insurance for personal vehicles does not necessarily cover instances when automobiles are used for business operations. If the insurance is based on personal use and something unfortunate happens when using the vehicle for business, getting a claim approved may be challenging.
To ensure complete coverage, remember to consult an insurance agent and clarify what is covered and what is excluded when personal vehicles are used for business purposes. You may also want to consider buying commercial auto insurance to be fully covered.
Myth #6: Property insurance is not needed when operations are done in the client’s area.
Some business owners may think that since they’re working where the client is located and using the client’s tools and equipment, they don’t need to get commercial property insurance. This is not necessarily the case. Coverage for property insurance varies. For instance, clients may be covered for any physical damage incurred at their area, while some may not provide coverage. Also, if the business owner is in charge of a tool or any equipment, his or her policy will cover any damage related to its use.
Myth #7: Insurance brokers come with huge fees that will lead to bigger premiums.
Some make the mistake of not bothering to get professional advice when choosing the type of coverage for their business. With so many things to consider when buying insurance, it is highly recommended to talk to someone such as an insurance broker who knows the ins and outs of policies and coverage. Brokers have business owners’ interests in mind, ensuring that the operations’ needs are met. They can also help in comparing quotes from different insurance providers and choose which policy best suits the business.
When it comes to buying business insurance, there are many factors to consider. An accident is bad—but finding out you weren’t covered all along is even worse. Make it a point to know exactly what coverage you need (and which insurance myths shouldn’t be believed) so your business doesn’t shutter over an accident.
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