What should small businesses should insure themselves against?

Is insurance for you, as a small business, even more important than mid-sized to large businesses? Well, if something goes wrong, you may not have the resources or resilience to bounce back. If you are ever knocked down, insurance can help you get back on your feet.

But despite the need for insurance, small business owners often neglect this aspect of security and end up paying a heavy price. For example, did you know that 75% of businesses in the US are underinsured? And 40% of small businesses don’t have insurance at all?

What does this mean for businesses, especially small business, owners? It means that in case of a lawsuit, property damage, or a loss of goods or materials, the owner would have to come up with all the funds themselves. Imagine if these costs run into the thousands of dollars, imagine if they run into the tens of thousands of dollars. Would your business survive or go belly-up?

So, of course, it makes sense to get insurance for small businesses. But what should you insure yourself against?

There are a bunch of insurance options for different aspects of business risk. Let’s take a closer look.

1. Injury on office grounds/damage to property

General liability insurance:

Imagine a situation at work where an employee, or a product that you produce, has resulted in the injury to a third party or property damage. Or if you are hosting a tour of your workplace, then the chances of someone tripping over some machinery or bumping their head are not so unimaginable. In this case, a General Liability Insurance policy can cover the costs of both, defense and damages. This is a very important and basic insurance to get because injury and accidents happen all the time.

2. Damage or theft to equipment/office space

Property insurance:

If you are the owner of your office space and have personal property within it for business such as computers, inventory and so on, Property Insurance will come in handy in case of fire, theft or even vandalism. Think of it as homeowners insurance for the valuables in the workplace.

3. Overall protection/replacement of assets

BOP or Business Owner’s Policy:

Think of this policy as your umbrella policy. BOP’s usually contain business interruption insurance, property insurance, vehicle coverage, liability insurance, and even crime insurance. You can even alter the BOP on the basis of what you need. A BOP is a cost-efficient way for businesses to safeguard themselves since it provides a bundle of policies rolled into one.

4. Mishaps with employees

Worker’s compensation:

This is a very important policy to have for all small business owners. Worker’s compensation provides employees who are injured on the job with insurance which includes wage replacement and medical benefits as compensation. In exchange, the employee gives up his/her rights to sue their employer. If you do not have this insurance, you may find yourself in sticky and extremely expensive legal complications.

5. In the case of human error

Professional Liability Insurance:

Also known as Errors and Omissions insurance, this policy safeguards you against failure to improperly carry out professional services. It is applicable for firms which typically deliver services. Think lawyers, accountants, consultants, insurance agents, hair salons, and technology providers and so on. This is also important to protect your business against legal implications of having delivered services unsatisfactorily.

6. To safeguard your business from slander

Directors and Officers Insurance:

As a small business, the longevity of your company is everything. So, it’s not enough to make an excellent product or provide a remarkable service. You must also project a positive company culture that survives specific individuals. In such cases, it is unfair for the blunders or ill work of any single person to affect the business in totality. And so, the Directors and Officers Insurance exists. This way, if one of the directors finds themselves in a sticky legal situation, the insurance can cover the costs of a lawsuit while providing the company some safety and security.

7. Dealing with data leaks

Data Breach

A survey conducted by cybersecurity firm, Norton, revealed that almost two-thirds of small and medium-sized businesses have been targeted by fake email scams. This is just one kind of threat. When dealing with sensitive data, one must be very cautious because a breach can mean a heavy loss. Your own data may be compromised. Data you hold in trust from your customers may get damaged or stolen. Data Breach policies are very important for any small business dealing with data.

A survey conducted by Insureon stated that of over 1000 small business owners, more than a third, i.e. 32%, experienced some event that could have led to an insurance claim. The most common claims are over a contract dispute, employee injury, theft, fire or storm damage, or customer injury. 1 in 3 is, of course, a huge number. Now think if those companies did not have recourse to insurance. Would they have lived to tell the tale?


In business, as in life, it’s better to be safe than sorry.