Business Insurance

Do I Need Insurance for My New Small Business?

If you’re a small business owner, it’s a vital part of your operations to include the necessary insurance you require to stay protected against all of the myriad of risks your business faces.

Not only is insurance generally required by law in most states, but it can also be required by clients or specific contracts.

Most importantly, it’s crucial to practice prudence by purchasing the correct insurance, as you can never anticipate losses. Without the proper insurance in place, you are putting yourself and your business on the line.

Significant losses in your business or organization can occur for a variety of reasons:

• Property damage to or within commercial buildings
• On-road accidents for those who use commercial vehicles
• Employee injuries
• Theft
• Data breaches
• Liability claims
• Natural disasters

Unless you want to be liable for losses and you are starting a new small business, then you will definitely need new Small Business insurance. There are plenty of ways to go about finding what you require to stay properly insured such that your assets are protected. Simply list what responsibilities you have and go from there. Consider general, property, employees, if you use vehicles in your business, and how much you personally have at stake in your business if you were to suffer a significant loss, i.e., Are you a sole proprietorship or an LLC?

New Business insurance is not only important but vital to the success of any small business. It is not an option.

Which Types of Business Insurance Do I Need (for my new business)?

There are many factors that will affect what types of Business insurance your business may need, including:

• The type of work you do and the industry you are in If you are in landscaping, then you may need to purchase insurance to cover costs resulting from pollution caused by pesticides and herbicides. If you happen to be a lawyer, then you will need a distinct set of coverage as well.
• The Number of employees and customers you have For those who employ a large number of people, you will most likely have a larger amount of Workers’ Compensation insurance. This can not only protect you in case of an injury but also protects your workers.
• If you deal in intellectual property If your business is a tech start-up, then one of the types of Liability insurance policies you may need to have would include Intellectual Property insurance. This would cover instances of theft or damage to your intellectual property, such as original ideas that aren’t protected by copyright or a patent.
• The amount of property and equipment you own This can be incredibly important if your business is completely dependent on the property that you own and the equipment you use. Without a forklift at your job site, a fleet of taxis, or construction equipment, your business will suffer and as such, it is highly recommended that you insure your property and equipment should anything happen to it ,such as fire, theft, loss ,or negligence.

Different types of Liability insurance helps to cover the costs of property damage and liability claims, but you may not need coverage for all types of Commercial insurance that exist.

Additionally, as your business grows, you may need to change the types of Liability insurance you have, whether that means adding or reducing coverage throughout your business’s life cycle.

Main Insurance Types You Should Consider

When buying new Small Business insurance, the main types of Liability insurance you should consider depend on different aspects of your business. Even though all businesses are different, some insurance types are needed in almost every type of business or industry. These include General Liability, Worker’s Compensation, Professional Liability, Cyber Liability, and Business Owner’s Policy (BOP).

General Liability

Commercial General Liability insurance is one of the most common, as well as most important, new Small Business insurance policies. It mainly protects your business from lawsuits from third parties such as customers. General liability also protects you from lawsuits resulting from bodily injury, property damage, or advertising liabilities (libel, slander, and defamation, for example). When dealing with a bodily injury case, the most frequent incident is that a customer slips on a wet floor, trips over something or happens to be burned by something on the premises. This would always be covered by General Liability.

Property damage cases (also covered by general liability) would come into play regarding contractor work or anytime your business performs a service on a customer’s home. If your employee made a mistake and damaged something, this situation would be covered with property damage included in your General Liability insurance.

Due to social media being huge in the modern business world, Advertising Liability is now a real threat. Employees are a reflection of your business, and if they post something on social media regarding a competing business, you could face a defamation lawsuit. General liability insurance includes Advertising Liability, a crucial aspect of a modern-day business.

Workers Compensation

Since you value your employees, you should always have protection in place in case someone becomes ill or injured on the job. Most of the time, Workers’ Compensation is also mandated by the state, but be sure to examine the regulations for where you operate your business from.

Workers’ Compensation insurance comes in many forms but generally covers Injuries and illnesses: Workers’ Compensation insurance will pay for medical expenses as well as recovery from work-related injuries. If an employee cannot work, then Workers Comp will pay for their missed wages until they can resume work.

• Funeral expenses: In the event, that a worker is involved in an accident that results in death, the workers’ comp policy will pay for funeral expenses and support for their children.
• Liability expenses: Workers Comp also includes insurance if your business is sued due to workplace injury or illness. You will not be liable for legal fees.

Professional Liability

Professional Liability is the coverage needed for businesses that offer professional services. It is also known as Errors and Omissions (E&O) insurance or Malpractice insurance. General lawyers, architects, therapists, and doctors will hold Professional Liability insurance.

The coverage under these types of policies includes:

• Errors and Omissions: For general mistakes that are not done maliciously but impact the client you serve.
• Breaches: Accidental breaches of contract that prevent you from being able to fulfill a contract.
• Defense costs: In case of mistakes that bring you to court, E&O insurance will take care of your legal fees.

Business Owner’s Policy

A business Owner’s Policy (BOP) is similar to an insurance package. It includes property coverages such as building and business personal property and some aspects of General Liability coverage. BOP insurance is a great way to buy new small business insurance encompassing many factors. You can also add coverage for items such as business interruption, which will cover you in the event that you cannot operate your business and generate income.

There are aspects of both General Liability and Commercial Property insurance within BOP. If you find yourself within a lawsuit, the court fees and lawyer fees pile up quickly; BOP will keep you covered.

Cyber Liability

Cyber risks are very real. Data breaches, cyber extortion, identity theft, damage to reputation, loss of income, and data loss are unfortunately more common than ever, so having Cyber Liability insurance will ensure you do not fall victim to significant financial loss from hackers or other cyber threats.

Commercial Auto

For any business that uses a car, this insurance is legally necessary and also very protective. Whether you run a pizza restaurant with a delivery service or a daycare that picks up children from school, personal auto insurance will not cover you in the event of an accident. Therefore, this is where Commercial Auto insurance comes in and keeps you covered to avoid unnecessary loss.

Differences Between Coverage

Although there are many similarities between General Liability, Worker’s Compensation, business owners’ policy, Professional Liability, and Product Liability, there are most certainly differences as well. It is very important to understand these differences and know what coverage your business should carry.

• Workers Compensation vs General Liability

These are very important policies covering completely different aspects of your business. General Liability covers your business if a lawsuit arises, such as legal fees, expenses, settlements, and judgments.

Workers Comp specifically covers your employees for work-related injuries, medical expenses, missed wages, and death. It also covers lawsuits for work-related injuries where General Liability does not.

• BOP vs. General Liability

The main difference is the lack of ability to add Property insurance to a General Liability policy. General liability does not allow customizations, while BOP can become an umbrella policy and be tailored to what your specific needs require.

• Professional Liability vs. General Liability

Designed to protect from lawsuits resulting from your professional services, Professional Liability is not for everyone. General Liability is completely different in that it pays for bodily injury and property damage claims. Especially if you run your business out of your home, as many therapists do, there are risks associated with clients coming to see you. General Liability and Professional Liability both protect you, but are associated with two completely different protection needs.

Benefits of Business Insurance

There are several benefits to obtaining business insurance for your small business:

• Cover for damage: Small business insurance can be helpful in cases of damage to a person or property, whether caused by your business or an unforeseen external source. If an employee has an accident on the job, a customer gets injured on your property, or a natural disaster creates damage to your business property, insurance can pick up the tab on repair costs.
• Business reputation: Having insurance means that you can recompense partners, customers, or third parties when something happens. That can make the difference between repairing relations versus not if you are able to make right what may have wronged your stakeholders.
• Business continuity: Insurance can help replenish funds or repair damage that would otherwise stop or negatively impact the business being able to conduct its normal operations. If your store gets damaged after a storm, for instance, and you don’t have the capital to get it fixed, business insurance can mean the difference between being able to reopen and going out of business.
• Risk-sharing: Business insurance means you don’t bear the entire burden of any act that might otherwise have the potential to disrupt, including to extreme extents, as in bankrupting your business. The insurance pays, and you can continue operating your business as usual.

How Much Does Business Insurance Cost?

Business insurance costs vary depending on a few factors, including the type of small business insurance you seek, what industry you are in, and the amount of risk your business is facing, based on both the type of business you own and your individual business history.

Other factors, such as the location of the business, can factor into the cost of small business insurance, including if your business is located in a place that may be more prone to severe weather events or theft. The size of your business will also impact the potential cost of your small business insurance premium. The larger your footprint is and the more employees you have, the more the cost may be.

How Do You Get Business Insurance?

You can apply for small business insurance in much the same way you would for personal insurance or in the same way a large business might seek insurance. Start by understanding what type of insurance you might need and for what purpose. Then ensure you have your business documents in order, including your business identification number and any history of insurance claims. You may need other details like the number of employees your business has and any physical location of your business. It may help to do some scenario planning in your head to get an idea of what level of coverage you might be seeking based on potential outcomes.

Where To Find Small Business Insurance?

Small business insurance is something many entities offer, including the most common large insurance companies, as well as smaller insurance entities. An insurance broker can be a traditional and trusted way of learning more about your options. Sites like kerfunding.com can also help you compare shops to see your choices and make the right decision for small business insurance.

Are you ready to get down to business?

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Many online lenders use technology to evaluate businesses differently from traditional lenders. For example, online lenders may access a business’ transactions and cash flow via their bank account’s website or examine other digital data points to analyze a business.

What is an Online Business Loan?

An online business loan is a source of funding that businesses can apply for and access via online lenders. Online business loans are useful options for small businesses in particular, because the application process is easier, and approval time can be shorter than traditional business loans.

Shorter Term Online Business Loans

This lender provides business owners with loans ranging from three to 24 months. These loans are often used for specific, shorter-term projects such as purchasing inventory, launching marketing campaigns, or general working capital. Some examples of shorter-term lenders are:

• OnDeck – works largely with “Main Street” businesses and offers loans of up to $250,000. OnDeck has loaned over $3 billion nationwide.

Longer-Term Online Business Loans

These lenders provide business owners with loans that range from 1 to 5 years with amounts up to $500,000. These loans are often used for longer-term projects such as major renovations or the opening new location. Some examples of these longer-term lenders are:

• Funding Circle – started in the U.K. and has lent over $700 million globally to small businesses; Funding Circle offers loans up to $500,000

Benefits of Online Business Loans

Online business loans present some benefits over traditional loans, including:

• Easier application process
• No need to go into a physical bank or lender’s office
• More options so business owners can choose the online business loan that best suits their business needs
• Flexible terms and repayment options
• Faster approval and access to funds

Best Uses for Online Business Loans

Online business loans can be used for a number of business needs, including:

• Working capital to cover operational and other expenses
• Cash flow to cover payroll or one-time gap payments
• Equipment purchases
• Technology or infrastructure investment
• Inventory scaling or purchasing
• Refinancing
• Real estate purchasing

Online Business vs. Traditional Business Loans

Online business loans are distinct from traditional loans in several ways, many of which are favorable for businesses, particularly small businesses, but there are some watch-outs.

Online Business Loans

• Flexible qualifications and terms
• Easier to qualify
• Quicker to get approved and get access to funds
• Streamlined underwriting process
• Higher fees and interest

Traditional Loans

• Require more documentation and collateral in most instances
• Specific qualification requirements
• More rigid underwriting process
• Potentially lower fees and interest

How to Choose the Right Loan For Your Business?

Choosing the right loan for your business will depend on several variables, including:

• How long you have been in business?
• Your business credit profile
• The financial health of your business
• How much money you need?
• What do you plan to use the funds for?
• Whether you have existing loans or other debt
• What repayment terms are you comfortable with, including time to repay, interest, and fees?

Services like kerfunding.com can help you compare what business loans are available to meet your needs and qualifications.

Rates & Repayment

Online business loans tend to have a higher interest rate relative to traditional bank loans. However, they also have much higher approval rates and can provide funding far quicker than traditional lenders. The rates will vary by lender, term, and risk and are typically lower than other options such as merchant cash advances. Repayment methods also vary depending on the lender, so make sure to do your research and find the best fit for your business. Some lenders require a fixed amount daily or weekly, while others require a traditional monthly payment.

Qualifications and Requirements for Online Business Loans

These both vary from lender to lender, but here are some general guidelines:

• Required Time in Business: Usually between 1-2 years
• Minimum Annual Revenue: $75,000 – $250,000
• Minimum Personal Credit Score: 500-650
• Industry: Industry requirements vary by lender, but restricted industries sometimes include financial services, home builders, real estate investors, etc.

The Best Online Business Loan Options

The type of business loan that’s right for your business will take into consideration the above factors as well as what lenders will approve your application. Some of the best online business loan options are:

• Fundbox: Loan amounts up to $150K with a minimum credit score of 600
• Funding Circle: Loans up to $500K with credit scores of 660
• Bluevine: Loans up to $250K with a credit score of 620 or up
• Ondeck: Loans up to $250K with a credit score of 600 or up

Application Process

A major benefit of online business funding is how easy it is to apply for a loan. Applications are usually just a single page and tend to be very straightforward. They can be completed online, over the phone, or via fax. However, there are certain things you’ll need for non-bank lenders, including:

• Your Social Security Number
• Your Business Tax ID
• Connection to your business bank account or paper bank statements (for certain lenders)
• Financial statements (typically for larger loan sizes)

Another advantage to working with online lenders is the quickness of their review process. The shorter-term lenders can often provide a decision in minutes or hours, while the longer-term lenders may have a decision within a few days. In a world where an application for financing in a traditional setting can take weeks or even months, the speed and simplicity offered by online business lenders are a major attraction for many business owners.