5 Insurance Myths Small Businesses Need To Stop Believing In Now

64% of all new jobs in the United States come from small businesses. 31.7 million small businesses are registered in the US and these create 1.5 million jobs. Around 15 million Americans work full-time for their own business. Small businesses in the US occupy 30-50% of all commercial space.


These small businesses are distributed across various industries with specific risks and challenges associated with each. Insurance is, of course, a prime necessity for all small businesses to protect themselves from damages and financial losses.


Small business owners have many questions about insurance. And of course, it’s possible to provide reasoned answers to questions as we have here. But what to do about the myths that exist around the insurance requirements, types, and needs for small businesses?


It’s time for some myth-busting!


Top 5 insurance myths

Worker’s Compensation Insurance is not needed if the company has only one employee

It is mandatory to acquire worker’s compensation insurance for all businesses in many of the states in the US.


There is an inherent lack of clarity on the worker’s compensation insurance. It is often believed by sole proprietors that this particular insurance coverage is not necessary for their business as there are no other employees deployed in the company. This; however, is not true. Some states in the US do not require worker’s compensation insurance for contract workers but it is mandatory for all the full-time and part-time employees irrespective of the number of employees in the firm. Different states have different laws and regulations on the insurance type. Do get information from a trusted insurance advisor about the applicable laws based on the norms defined by your state.


Insurance is not relevant while working at the client’s location and while using client equipment

Small business owners sometimes believe that insurance like property insurance is not required while they work at a customer’s location using the client’s equipment. This is not always true. Terms and conditions can vary as per the clauses included in the client’s contract. Some clients may provide coverage for damages on the site while some may choose not to provide any coverage. This is why a need may arise for appropriate insurance cover. It is important to discuss the applicable terms rather than make assumptions.


Insurance is required for individual client contracts

Many businesses assume that specific insurance is needed for every client contract. However, in many cases, wider business insurance policies are enough for multiple client contracts. That said, some specific insurance types may require renewal for every new client. For instance, customer jobs with higher complexities and risks may need supplemental insurance. It is always advisable to verify and validate the insurance policies and terms as you add new customers. Usually, most of the policies define the terms and services included very broadly. Changes in the insurance requirements occur with the addition of new services or changes in the business location, and similar alterations.


When sued, shutting the business will save you from a lawsuit

Small businesses are not immune to making mistakes and errors in their business operations. Customers or stakeholders can sue the businesses claiming damage due to negligence in such events.


Many small business owners believe that shutting down the business will automatically dissolve the legal charges. However, courts do not consider the current operational status of the business. They consider the state of business operations at the time of the issue. Small business owners may end up having to make settlements from their accumulated assets if the suit goes against them even though the business may no longer be operational.


Business coverage is not required if the business is run from home

With technological advancements, many entrepreneurs are running their small businesses without any commercial office setup. The businesses run online with the business owner’s home registered as the business address. Remote work culture has further increased after the outbreak of the Covid-19 pandemic. These factors have increased home-based business registrations. It is, however, possible that business-related damages can take place in these home offices. Home insurance policies do not provide coverage to such events and damages.


General liability insurance can offer home-based business owners protection from basic issues and damages. For example, these will cover basic business property, such as laptops, specialized tools, and other computing gadgets. Some of the injuries the clients may suffer or the incidents in the home office are also covered by general liability insurance.


To Sum it Up

Insurance is a necessity for every business type irrespective of its domain, size, scale, and nature of activities. The consequences of not taking insurance can also be severe for small businesses. That’s why small business owners must take the time to discuss their specific needs with their insurance agents. Clarity on the insurance needs and applicable terms is crucial and this will help these businesses stay safe and protected.