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Prestige Insurance Group, Inc.

Coverages Suggested by SBA

By Robert Longley

While the federal government does not require small business insurance, state governments do. Most states require businesses with employees to pay for workers' compensation insurance, unemployment insurance, and state disability insurance. Your state may also require you to carry insurance for activities specific to your business. For example, if you use your car or truck in your business, you may be required to have commercial auto insurance. In addition, your lender will probably require you to carry insurance to protect their investment in your business, like fire or flood insurance.

While insurance coverage is available for every conceivable risk your business might face, the US Small Business Administration (SBA) suggests all business owners discuss their specific needs with an insurance agent or broker. At a minimum, the SBA suggests business owners consider the following insurance coverage:

Insurance for Businesses with Employees

Workers' Compensation Insurance

Businesses with employees are required to carry Workers' Compensation Insurance coverage through a commercial carrier, on a self insured basis, or through the state Workers Compensation Insurance program.

Unemployment Insurance Tax

Businesses with employees are required to pay unemployment insurance taxes under certain conditions. If your business is required to pay these taxes, you must register your business with your state's workforce agency.

Disability Insurance

Some states require employers to provide partial wage replacement disability insurance coverage to their eligible employees for non-work related sickness or injury. Currently, if your employees are located in the states and territories of California, Hawaii, New Jersey, New York, Puerto Rico or Rhode Island, you are required to purchase disability insurance.

Types of Insurance for All Small Businesses

Home-Based Business Insurance

Homeowners' insurance policies rarely cover home-based business losses. Depending on risks to your business, you may add riders to your homeowners' policy to cover normal business risks such as property damage. However, homeowners policies only go so far in covering home-based businesses and you may need to purchase additional policies to cover other risks, such as general and professional liability.

General Liability Insurance

General liability insurance to cover legal problems due to accident, injuries and claims of negligence. General liability policies protect against payments as the result of bodily injury, property damage, medical expenses, libel, slander the cost of defending lawsuits, and settlement bonds or judgments required during an appeal procedure.

Product Liability Insurance

Companies that manufacture, wholesale, distribute, and retail a product may be liable for its safety. Product liability insurance protects against financial loss as result of a defect product that cause injury or bodily harm. The amount of insurance you should purchase depends on the products you sell or manufacture. For example, a book store would have far less risk than a home appliance store.

Professional Liability Insurance

Business owners providing services should consider having professional liability insurance (also known as errors and omissions insurance). This type of liability coverage protects your business against malpractice, errors, negligence in provision of services to your customers. Depending on your profession, you may be required by your state government to carry such a policy. For example, physicians are required to purchase malpractice insurance as condition of practicing in certain states.

Commercial Property Insurance

Property insurance covers everything related to the loss and damage of company property due to a wide-variety of events such as fire, smoke, wind and hail storms, civil disobedience, and vandalism. The definition of "property" is broad, and includes lost income, business interruption, buildings, computers, company papers and money. 

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