Do Self-Employed Entrepreneurs Need Additional Insurance?
You probably already have several insurance policies in your personal life, including a car insurance policy to protect your vehicle, personal health insurance to reduce your medical expenses, and maybe a life insurance policy to protect your family. If you’re operating a small- to mid-sized business with multiple employees, you’ll also need several insurance policies, including worker’s compensation insurance, and insurance on any company vehicles.
But what if you’re self-employed, and operating a business by yourself? Do you need any additional insurance policies to protect you and your business?
If you’re doing business at a specific location and you have clients, employees, or partners who share that location, or if you’re distributing a product that could affect the health or wellness of your customers, you should invest in liability insurance. According to Jim Leach, LLC, anyone hurt on someone else’s property, due to the property owner’s negligence, can file a premises liability claim: “A few common examples of premises liability claims include dog bites, falls, swimming pool accidents, inadequate security, and deck collapses.”
Professional liability insurance comes in many shapes and sizes, depending on what you’re selling, who you’re selling it to, what industry you’re in, and the size of your company. You’ll need to speak with an insurance representative to find the liability insurance policy that best fits your company.
At first glance, you may confuse property insurance and liability insurance, but property insurance is distinct. According to Insureon, it “protects the stuff your business owns by paying to repair or replace damaged items after a covered event.” For example, if your business falls victim to flooding, a fire, another natural disaster, or comes to physical harm via vandalism or an accident, property insurance can cover the damage. If you work from home, you’ll likely be covered by your existing home insurance policy (though you’ll want to contact your home insurance provider just to be sure), but if you work at a separate location, which you own, you should have it insured.
If you have employees, you may need to buy additional insurance to protect them and their needs. In almost all areas, worker’s compensation insurance is mandatory if your employees are working onsite; every state is different, so make sure you do your research to ensure you’re following the correct procedures. Employers are expected to maintain a workplace that’s reasonably safe for its employees, but accidents sometimes happen, and worker’s comp insurance guarantees some level of protection to workers if an onsite accident does occur. You are not required to provide health insurance to your employees, but it’s a common and attractive perk you should consider if you have full-time staff members on your team.
If your company makes products for retail, you may want to invest in an additional policy for product insurance. This type of insurance protects you against financial losses that happen as a result of a product defect that causes injury or harm to your customers. Product insurance sometimes comes as an additional option on your general liability insurance policy, so make sure to ask your insurance provider.
Business Interruption Insurance
Consider the possibility that a catastrophic event unfolds and renders you unable to continue business operations; you may be injured and unable to work, or your office may be ruined by a natural disaster. In these cases, your health insurance would cover the medical costs of your injuries, and your property insurance would cover damage to your property, but you’d need business interruption insurance to recover the income you’d lose by not being able to continue normal business operations. Business interruption insurance isn’t legally necessary, but it may be an important investment—especially if your business hinges on your active role in the company.
Self-employed entrepreneurs have more flexibility than major corporations when it comes to insurance, but there are still some required policies to protect your employees, and some recommended policies to protect your property (and yourself). If you’re uncertain about your current coverage, make sure to talk with an insurance representative, and make changes to ensure you’re adequately protected for the future.