Keeping your operating costs low is a major concern when you’re running a small business. There may not be room in your budget for optional add-ons right now, so you feel you have to stick to the essentials. As a result, you’ve probably wondered: Do you need small business insurance? Or is it an extra cost you can forgo for now?
Here are five questions to ask when you’re determining whether your small business needs insurance or not.
#1: Will Clients Ask for Proof of Insurance?
In some lines of work, clients will ask to see proof of insurance before even signing a contract with your company. Why? Because hiring a contractor or consultant without adequate insurance means the client will be forced to assume risk — they’d be on the hook for the cost of injuries or property damage that may occur. Many clients will only work with companies that carry their own insurance for the sake of their peace of mind (and pocketbooks).
Consider this scenario: Carla runs a small carpentry outfit. The owner of Gia’s Gift Shop wants to hire Carla’s Carpentry to handle some renovations before her grand opening — a great opportunity! But the deal is contingent on Carla being able to produce a certificate of insurance for a general liability policy with a policy limit that will satisfy Gia. Without this important protection in place, both parties are left vulnerable to costly liability claims stemming from potential bodily injury and property damage.
Here’s what your certificate of insurance will communicate to clients:
- Your policy number
- Your insurance company/agent
- The types of coverage you carry
- The limits of your coverage
- The dates your policy is effective
#2: Will You Need to Lease Commercial Premises?
If you’re planning on leasing commercial premises, you’ll often need to show proof of small business liability insurance to get approved. The landlord will likely ask you to submit your certificate of insurance during the application process for that new office or other commercial space.
There are a few reasons landlords want to see liability insurance squared away before signing a lease. First, it reassures them you won’t have to stop paying rent if you face liability claims. If someone slips in your entryway and fractures a bone, for instance, your liability policy will cover the victim’s medical bills and rehabilitation costs — helping you continue to pay your fixed rent and utility costs without a hiccup. It also protects landlords from financial responsibility in the event of an accident on the premises.
#3: Will You Enter Clients’ Property for Work?
Whenever you enter a client’s home or business to do work, there’s always the risk you’ll inadvertently damage their property or cause an accident through negligence. A simple “oops” moment can turn into thousands of dollars in liability very quickly, which is why even the most careful companies need coverage.
#4: What Types of Lawsuits Could Your Business Face?
Lawsuits alleging property damage or bodily harm are self-explanatory. But these are not the only lawsuits small businesses can potentially face. There’s also advertising injury to consider — a competitor may accuse you of stealing their intellectual property, like a logo or a photograph. General Liability insurance protects small businesses financially against all these types of lawsuits, from legal fees to damages.
#5: How Much Would a General Liability Policy Cost?
The last thing to consider is how much it will really cost your business to carry a General Liability policy. Coverage is only getting more flexible over time. Case in point: Many small businesses can get hourly or daily liability insurance from Verifly, allowing them to pay for only as much coverage as they need. Other businesses are able to get competitive rates on monthly or yearly coverage. But the cost of a policy is almost always significantly less than the cost of a lawsuit.
After asking these questions, you’ve probably determined it’s in your best interest to have liability insurance for your small business. By comparing policies and finding the best fit, you’ll be able to get coverage without breaking the bank.