Small Business Defined and Insurance Coverages | Hitchings Insurance Agency
A small business is defined as any business with 500 or less employees. According to the Small Business Administration, there are roughly 28 million small businesses in the United States. Conversely, there are only 18,500 businesses with over 500 employees. Small businesses make up 64% of the United States workforce. Just think about the makeup of the businesses in your hometown! As you can see, small businesses are an enormous contributor to the overall success of our economy.
Importance of Small Businesses
Our home office is located in the vibrant community of Findlay, Ohio. It is also home to large national brands like Marathon Petroleum, and Cooper Tire & Rubber Company, among others. We are very thankful for them being in our community. They give back, while also providing thousands of jobs.
As I sit and think about the foundation of our community, I cannot get past ALL of the small business owners and employees. We work with them. They support us and we support them. Small businesses are just as important to our local economy as the corporations. For instance, small businesses encompass a lot of services:
- doctors’ offices
- dentist offices
- childcare centers
- retail stores
- investment offices
- coffee shops
- auto dealers
- auto repair shops
All of them make our local economy spin. Truth be told, small businesses literally keep our economy afloat to serve our people!
Insurance for a Small Business
So far we have defined a small business and its importance to our community. Now, let’s talk about insurance and why is it important. Small business insurance is made up of different coverage items, which include the following:
- general liability insurance
- property insurance
- business income or interruption insurance
- business auto insurance
- commercial umbrella coverage
- workers compensation coverage
- cyber liability
- professional liability insurance coverage (in some cases)
Next, let’s look at each of these in more detail.
General Liability Insurance
General liability insurance is the most commonly purchased coverage. It provides protection from the cost of claims made against a small business for bodily injury or property damage.
Here is a simple example:
- A customer slips and falls at your office location and breaks her arm.
The general liability coverage will step in and cover the medical treatment costs if you were sued.
Commercial Property Insurance
Commercial property insurance is intended to protect a small business building, the business’ personal property (inventory and stock), business furniture, computers, and much more. It covers business property against a large number of perils:
- lightning strike
- accidental discharge of water
Business Income or Interruption Insurance
Business income or interruption insurance helps replace lost income if you have to shut down for a covered loss.
Here is a simple example:
- If a restaurant were to experience a fire loss, they would need to rebuild and clean the damaged area. The health department would have to come in to approve they could re-open. What happens to all of the lost income for not being open during the period of rebuilding and getting the okay to re-open?
Business income insurance is intended to step in and pay for those lost sales when the restaurant would have regularly been open! Not carrying this coverage could put your small business in jeopardy closing forever. This coverage should be discussed!
Business Auto Insurance
Business auto insurance helps to cover the costs of auto accidents. This will help pay for the damage of the owned vehicles, while also paying for any property damage or bodily injury your business may cause to others.
Commercial Umbrella Insurance
Commercial umbrella insurance increases the limits of your liability insurance plans. This is an additional layer of protection that blankets the general liability and auto liability base plans. These plans can be purchased in increments of $1,000,000. They are very affordable for the amount of coverage provided.
Workers Compensation protects the employer against employees who become injured or ill on the job. If related injuries lead to death, these benefits can be paid to the individual’s family. This coverage varies by state. Some states, such as Ohio, need to work directly with the Bureau of Workers Compensation. Others work with an insurance agent to obtain the coverage.
Cyber liability protects against cyber security breaches, theft of electronic data, coverage for malware, ransomware, and other forms of cyber disruptions. This coverage is fairly new and is becoming more important to a small business plan. Cyber attacks are on the rise around the world. Therefore, there is a growing concern for data protection.
Professional liability covers against errors and omissions in the products or services provided.
Here is a simple example of a professional liability claim:
- An architectural firm completes a design plan for a new home. The home is built. However, the support beams for the project are insufficient to hold the weight of the home. The beams need to be replaced as it is failing and the home is unsafe. This would be an error on behalf of the architectural firm. They recommended and designed the plans for the new build, and it was built to spec by the contractor.
Ensure proper protection!
In conclusion, this is just a glimpse at the available coverages for a small business. There are many other options for coverage. The proper coverage is more affordable than you think! Most importantly, don’t be forced to shut down your small business due to improper coverage. After all, you are the lifeblood of the United States economy. We want you to be around for many years to come! Please talk to an independent insurance agent to discuss your coverage needs and options. In the meantime, learn more about how an independent agency can help you!
Thank you to Ryan Pessell, Managing Partner and Insurance Professional, for providing the content of this blog.