Without the right insurance coverage, these seven common incidents could leave you footing the bill.
1. Natural disasters: Will your policy cover extreme weather damage?
If your business is in an area prone to natural disasters like ice storms or wind, you could be left to cover extensive property damages out of pocket if you don’t have sufficient coverage.
How to fix it: Commercial property insurance (also known as hazard business insurance) could help cover financial losses if your business property is damaged by extreme weather.
2. Business interruption: What happens if you have to shut down?
A major equipment breakdown, fire, vandalism or other unexpected incident could force your business to close for days, weeks — even months. You may be left with bills to cover rent, payroll and other expenses — with no revenue coming in.
How to fix it: Business income insurance, (also known as business interruption insurance), could help cover lost income you would have earned if your business closes for repairs after a covered event. It can also help pay for ongoing business expenses you may incur while your business is out of commission.
3. Professional liability: What if a client claims you made a professional mistake?
If a customer sues you for making a professional mistake that cost them money, this can create big headaches for you — whether the allegation is true or not. Hiring a lawyer to defend your business can be costly. And unfortunately, general liability insurance — one of the most popular policies for small business owners because it covers a number of different risks — won’t typically cover you if you give bad advice, miss a deadline or make a professional business error.
How to fix it: Professional liability insurance (also called errors and omissions insurance, or E&O insurance) could help you protect your professional reputation and resolve claims quickly. It could help pay for some legal defense costs. And if you’re found to be at fault, professional liability could also help pay for some settlements.
4. Employee injuries: Are you required to have Workers’ Compensation insurance?
Many small business owners incorrectly assume they don’t need workers’ compensation insurance unless they have multiple employees. But many states require workers’ comp coverage even if you just have one.
Even if you don’t have employees, workers’ comp can offer protection for you as a solo business owner in case you get injured or ill on the job. Without coverage, you could be responsible for medical costs on your own.
How to fix it: Check your state’s requirements and secure workers’ compensation insurance to protect you, your employees and your business.
5. Equipment breakdown: How would you repair or replace damaged essential tools?
Many businesses run on specialized equipment, such as refrigerators for restaurants, tools for construction or computers for consultants. If a power surge, mechanical failure or other issue takes your essential equipment out of commission, repairs can be costly — and standard commercial property insurance may not cover the expense.
How to fix it: Equipment breakdown insurance could help protect your business from unexpected malfunctions and some of the financial losses that come with them. This type of protection could help with repairs, replacement and even lost income if your business is forced to pause operations due to damaged equipment.
6. Vehicle accidents: What if you or an employee have a collision on the job?
Personal auto insurance does not typically cover business-related driving. If you or an employee uses a personal vehicle for deliveries, client visits or other business tasks, an accident could leave you paying out of pocket for medical bills, property damage, legal fees and more.
How to fix it: A commercial auto policy could help cover injuries and damages that result from work-related driving. Most states require you to insure business-owned vehicles for some types of accidents. What kind of vehicle insurance you need depends on:
- The type and number of vehicles your business uses.
- How they’re being used.
- Who’s driving.
- The purpose of your business driving.
7. Cyber threats: Is your business protected against hackers?
Small businesses are frequent targets of cyberattacks because they often lack the cybersecurity protections of an enterprise. A phishing email, ransomware attack, wire fraud or data breach could expose sensitive customer information to the wrong people, and cost you thousands in recovery.
How to fix it: Cyber insurance can help a business assess, respond to and prevent a wide range of technology-related threats. It can be especially valuable for small businesses that collect, store or process private customer information like health data, legal records or financial data (like credit card numbers).
