The Small Business Owner’s Guide to Insurance for Things That Aren’t Their Fault!

The pandemic altered the way the world operates, possibly forever. Emerging small business and work-from-home trends are here to stay. The number of new small businesses also surged. According to the US Chamber of Commerce, 5.4 million new small businesses filed applications in the United States in 2021. Presently, there are around 33.2 million small businesses in the US alone, which is about 99.9% of all US businesses.

However, the risks associated with small businesses are also large, growing, and varied.

An interesting news story described how some small businesses refused to accept certain clients because of their personal and subjective beliefs. These refusal rights remain with the business owner, but they also bring a lot of bad publicity in certain sections of the media and could attract some penal provisions or lawsuits.

Such dangers can befall small business owners if they are not cautious in how they conduct their operations and deal with situations. Here’s a quick guide to using insurance to protect your business from social and financial disasters because of others.

General Liability Insurance

Liabilities are a major source of frustration for any small business owner trying to make ends meet in the market. A general liability insurance policy can assist any business owner in paying for litigation or medical expenses incurred on someone as a result of circumstances beyond their control. 

For example, if your employee misbehaves with a customer and the customer sues your company for mental harassment, you are clearly in trouble because of others. In such cases, having liability insurance can aid in the resolution of the case, whether inside or outside of court.

Flood Insurance

Natural disasters are the most dreadful situations that business owners can face. According to a previous report by the Federal Emergency Management Agency (FEMA), approximately 25% of small businesses never reopen following a disaster. 

Special disaster-specific insurance policies, such as flood insurance and earthquake insurance, can be extremely beneficial to small businesses in times of crisis. With these insurance policies, your company can receive assistance in repairing or rebuilding your facility, as well as temporary compensation if your operations are disrupted because of these disasters.

Commercial Auto Insurance

Auto insurance is a must-have policy for any business owner. It becomes even more important when you have employees who can get you into trouble. For example, if your employee is involved in reckless driving and hits someone, the financial consequences can be severe. 

A small business owner who has commercial auto insurance can be relieved of the financial and mental burden that legal cases and compensation can bring. A properly valued policy can assist you in covering medical expenses, legal fees, and other associated costs.

Cyber Liability Insurance

Cybercrime is on the rise all over the world. According to an Accenture report, the average number of attacks per company increased by 31% in just one year, from 2020 to 2021. These crimes are more likely to affect small business owners than a large team that has most likely invested sufficiently in encryption and data security. These types of attacks can result in data breaches and business interruption, resulting in a loss of reputation and client issues. IBM’s 2023 study reveals that the average cost of a data breach is a whopping $4.45 million.

Loss from cybercrime is not the fault of a small business owner because these attacks can occur anywhere and at any time. That said, purchasing cyber liability insurance can assist in smoothly navigating the process of getting out of a litigation caused by such crimes.

Business Interruption Insurance

The pandemic, as well as other natural disasters such as floods, hurricanes, and wildfires, have taught American small business owners that almost anything can happen to their business and disrupt the entire operations in a matter of minutes. These numerous instances that are not the fault of a small business owner can cause the business to close temporarily or permanently. 

Thus, having business interruption insurance is a wise move to deal with the crisis and avoid losing all your wealth by standing back or attempting to shut it down without incurring debt. It primarily covers income expenses, loan payments, and temporary relocation expenses, among other things.

Umbrella Insurance

Umbrella insurance is a must-have policy for all small business owners who want to be protected when it is technically not their fault. This policy contributes to the coverage of everything else that other policies cannot. 

Your dog, for example, bit a customer at your bakery because they stepped on the dog’s tail. Whose fault is it? In such cases, umbrella insurance assists in covering any financial burden that the small business may face by assisting in paying legal fees or other necessary compensation.

Apart from these options, small business owners can obtain workers’ compensation insurance. If an employee is injured and threatens to sue your company, this policy can help cover losses because of business interruption or pay a compensation amount to the employee.

Gonzalez Insurance understands the plight of other members of the small business owners (SBO) community. If you want to re-evaluate your current policies or need assistance with portfolio analysis, we can assist you. We specialize in thorough risk assessment, ensuring that your company is never underinsured. Contact us today to receive your personalized quote.