So You Want to Start a Small Business?
Starting your own business is a lot of work, and you want that work to pay off. But when you get caught up in the hustle of securing real estate, hiring employees, and winning customers, you run the risk of overlooking business insurance.
Covering your business depends on a lot of factors, including your type of business, how your ownership is structured, and where you’re located. It can take a bit of time and effort to understand your insurance needs; but whatever you do, you should never go uninsured — especially if you’re putting your nest egg into your business — because an unexpected disaster, like a hurricane, can wipe out an unprotected business.
Your Texas Farm Bureau Insurance Agent is there every step of the way to help you choose the right coverage to protect your business. Here’s what you need to know.
Business Owners
No matter what type of business you start, “The main thing you’ll need is a commercial liability policy to protect against lawsuits by employees or customers — for example, in the event of an accident on your premises,” Texas Farm Bureau Insurance Agent Reagan Janda says. Commercial liability policies also protect your business against claims of property damage and false advertising.
Business Partners
If you’re starting your business with one or more partners, a buy-sell agreement can prevent disputes and business disruption if one partner passes away. “It’s a form of life insurance that allows the surviving partner to buy out the deceased partner’s share of the business from their family so the business can continue,” Janda says.
Your Employees
If you have employees, you should carry two types of insurance for them: workers’ compensation and unemployment insurance. In Texas, all employers that meet state requirements must register and pay unemployment tax. Texas doesn’t require privately owned businesses to carry workers’ compensation insurance, but without it your business is more vulnerable to lawsuits if one of your workers is injured on the job. You may need workers’ compensation coverage in order to bid on public projects, too.
Your Products
Will your business make products? If so, you’ll need product liability coverage, which is often part of a commercial general liability policy. This coverage protects you from claims of injuries or property damage caused by your company’s products. It’s especially important if you sell items for kids, Janda says.
Your Work
Even the most conscientious professionals can make mistakes. That’s why accountants, consultants, doctors, and other service providers — even insurance agents — carry professional liability insurance. These policies protect your business from any errors and omissions in your work that result in problems for your clients.
Your Property
Will your business have offices, stores, or warehouse space? You’ll need a comprehensive commercial property policy, “Especially if you own the building,” Janda says. These policies safeguard your business against damage by theft, fire, and storms. Other types of property coverage can shield your business from water damage caused by leaking sprinklers or roof damage caused by ice and snow. While ice may not seem like a big risk factor in most of Texas, high winds, floods, and hurricanes can be. If your business is located on the coast or in a flood plain, you may need special policies to protect it from tropical storm damage and high water.
If you run your business out of your home, it’s wise to review your coverage to make sure your business activities are covered. You may need to add an endorsement to your homeowners policy or add an in-home business policy.
You may want business interruption insurance, too, especially if your business has contracts to supply customers with products or if you run a store or restaurant that depends on daily traffic for income. In the event of a fire or natural disaster, business interruption coverage can mean the difference between a quick recovery and a business failure.
Company Vehicles
Will your business use company vehicles for service calls or deliveries? If so, you’ll need commercial auto insurance to protect your business from liability, in case of accidents.
Specialized Needs
If you can start a business for it, there’s almost certainly insurance for it. For example, if your business handles sensitive customer data like medical records or payment information, insurance against data theft can protect you from costly lawsuits if your system is ever hacked. The Insurance Information Institute’s “Small Business Insurance Basics” is a good starting point if you want to look at the different types of insurance you may need for your small business to prepare for discussions with your Agent.
Making Sure Your Business Thrives
If you’re just starting out and all this insurance information seems overwhelming, remember that it’s there to help you succeed. And speaking of success, there’s one more type of insurance to keep in mind for later, when your hard work pays off: business continuation insurance. Texas Farm Bureau Insurance Agency Manager Kelly Dickson recommends this coverage for sole proprietors who realize, “I’ve built something here,” and want their business to continue on after their time. Business continuation coverage is a life insurance policy, plus a legal plan, that allows your heirs to hire expert help to run the business until they can take over.
The ideal time to buy this type of policy is when the value of the business reaches a point that matters to you and your family, Dickson says. “Maybe it’s $250,000, maybe it’s $2 million.” The important thing is to buy your policy while you’re still young enough and healthy enough to qualify for coverage. Also, the younger you are, the cheaper the rates!” he says.
With the right insurance, your new business has the protection it needs to overcome obstacles on your road to success and even benefit your family for more than one generation. Talk to your Texas Farm Bureau Insurance Agent about your coverage needs so you can see your hard work grow into a successful business.
Want more small-business start-up advice? Learn how to take control of your small business.
Coverage and discounts are subject to qualifications and policy terms and may vary by situation. © 2017 Texas Farm Bureau Insurance
