Being a successful entrepreneur involves access to sufficient capital and business acumen among other necessities. Another important area that requires attention, contingent on the type of business, is insurance to protect business assets from potential risks.
This article will look at the types of insurance available to a small business owner, which might be worth further investigation. Please note that only some of the following types are deductible as business expenses; seek professional advice for more insight.
Insurance for business owners and key employees
- Life insurance. As the name indicates and has been written about in the past, life insurance protects the surviving family members of the owner and/or key employees of the company and prevents debt obligations from sinking the remaining people.
- Disability insurance. In case of a debilitating injury or illness, disability insurance will provide the insured with income for a specified period of time.
- Critical illness insurance. In the event of a critical illness, an insurance provider will provide the insured member with a lump sum benefit to at least partially offset the loss of employment income.
- Partnership insurance. This type of insurance allows business partners to buy or sell shares of the corporation and facilitates the orderly transfer of business interests upon a partner’s death, disability or retirement.
- Key person insurance. Some companies may have key employees who are vital to the continued success or even operation of the business. To mitigate the impact in case of a loss of such people, businesses can obtain key person insurance.
Insurance for business property
- Property insurance. Businesses obtain property insurance to protect their physical assets from various risks such as fire, flood, theft, etc. It is important to identify the exclusions that might apply in an open peril policy.
- Contents insurance. This type of insurance covers assets kept at the business premises. If the office space is leased, the property owner’s property insurance may not cover the contents stored on site as part of the business.
- Vehicle insurance. As an important cog in the modern business world, vehicles need to be insured.
- General liability insurance. This type of insurance provides coverage if there is an injury to employees (or others) at the work site.
- Product liability insurance. As the term indicates, product liability insurance offers coverage in case of a product made by the company is defective or causes serious injury to a user.
- Professional liability insurance. Medical doctors, accountants, engineers, lawyers, etc. require separate insurance for protection in the event of a lawsuit arising due to their negligence, misrepresentation, errors, omissions, etc. in a professional capacity.
- Third-party liability insurance. In order to mitigate the risks posed by the actions of a third-party, businesses may purchase this form of protection.
For further details on insurance types, finding the correct insurance and resources for assistance, please refer to this Canada Business page.
If you are/were a small business owner, would you say that some of these types are/were unnecessary for your undertaking? If so, what are/were the most significant ones for your line of work?If you would like to read more articles like this, you can sign up for my free weekly money tips newsletter below (we will never spam you).