The decision to start your own business can be one of the most rewarding of your career. According to the U.S. Chamber of Commerce, small business owners are America’s unsung heroes, creating as many as 80 percent of the net new jobs in the country today.1

But what about the risks these entrepreneurs take to make their dreams come true? In business, as in life, “stuff” happens. A man walking across your parking lot slips and falls, injuring himself. A customer sues you for an error made by one of your suppliers. A key employee becomes ill and can’t come to the office. Your hard work and dreams can be lost in a few minutes if you don’t have a plan for dealing with these and other unforeseen events.

Small business insurance is vital to the success of any small business – regardless of size or structure. That’s because the right type of coverage can help fortify not just your business against unexpected and potentially devastating events, but your personal financial well-being too. But what exactly does a sound risk management plan entail?

Generally speaking, there are three broad categories of insurance that are crucial to any small business: coverage to help protect your tangible assets, coverage to protect your human capital, and coverage to protect your ability to do business. The specific types of insurance you need will depend upon the type of business you’re starting and how you plan to conduct that business. But selecting the right coverage for your business shouldn’t be an either/or scenario. What you want is to find the right combination of policies that provides protection without duplicating coverage.

Protecting Your Tangible Assets

Consider the possibilities: a broken pipe floods your office. A customer’s car is damaged in a fender-bender with your delivery truck. A valuable piece of jewelry is stolen from your display case. As a small business owner, you need property insurance to protect your tangible assets (buildings and contents, valuables, computer systems, etc.) against loss. You’ll also need a general liability policy to cover your business in the event your company is sued for something it did (or even didn’t do) that resulted in bodily harm or property damage to someone else.

While it is possible to purchase separate individual policies for each, many small business owners combine their business property and liability insurance requirements into a single policy – called a business owner’s policy (BOP). A BOP typically includes property protection for a building and its contents, loss of business income after an accident, and liability coverage for physical injury or damage caused by an employee in your company.

What are the advantages of a BOP? In many cases, a BOP can offer small business owners cost savings and convenience. The reason is simple: since it is generally less expensive for the insurance company to service one policy compared to several, total insurance costs for the business owner are usually lower using a packaged policy rather than a series of individual ones.

But keep in mind that every business is unique. That’s why many business owners purchase add-on coverage based on their business’s particular needs. For example, a retailer with numerous employees may carry specialized coverage to protect against loss of property due to employee dishonesty, such as embezzlement, fraud, or other criminal acts, while a toy manufacturer may want an additional endorsement to protect against mechanical breakdown. The key is understanding the specific risks you face and then selecting the right type of coverage to fully protect your company.

Protecting Your Human Capital

What would happen to your business if a competitor lured away your top designer … your office manager learned she has cancer and needs a leave of absence … your accountant told you saving for retirement should be a priority?

As your company grows and you add employees, it becomes increasingly important to protect your human capital – the key employees who are vital to the success of your business. Insurance to protect your employees can help you create a competitive benefits package – one that also can help you enhance your business by recruiting and retaining quality employees.

Employee group health, life, and long-term disability insurance are three of the most popular types of coverage. Another type of insurance that is becoming
increasingly popular as an employee benefit option is long-term care insurance.

Small business owners should also keep in mind that most states require companies to carry workers’ compensation to cover the cost of work-related injuries and some amount of short-term disability coverage.

When it comes to planning for the future, an employer-sponsored retirement plan can also provide an anchor to keep employees committed to a small business owner’s success. That’s because, when you provide a way for your employees to save for their own future, you give them a highly-valued benefit – one that also may increase the chances they will make a long-term commitment to your business.

Which retirement plan is best? The type of plan that’s right for you will depend on several factors, including your business structure, the number of employees you have working for you, and your ability to make contributions on your employees’ behalf.

Protecting Your Ability To Do Business

Protecting your human capital makes good business sense, but what happens when a loss directly impacts your bottom line? How will you meet your expenses if a major event, such as a fire or a storm, shuts down your company? How will you keep your business running if you or a key employee becomes unable to work or dies?

Business overhead insurance can provide cash you may need to meet business expenses such as rent, payroll, benefits, utilities, taxes, maintenance costs and others in the event of a disaster. Key person insurance can help your company weather the disability or death of a key employee or buy out the key person’s heirs if ownership rights are involved.

Protection That Grows Along with Your Company

In short, the right insurance coverage can help ensure your success by protecting against unforeseen events that could derail your business. But managing risk is about more than having the right coverage – it’s about making sure your risk management program evolves to protect your business through all its phases of growth. That’s where an experienced financial representative can help.

A financial representative who focuses on meeting the needs of small business owners can help assess your current financial security needs to determine the coverage you need and in what amount; create a strategy that can grow along with your business; and provide support to ensure your risk management strategy reflects your business’ ongoing needs.