What 9/10 Small Business Owners Do Not Know About Small Business Insurance!

The forms of coverage you require depends on several factors: The size of your small business, how your small business is organized (sole proprietorship, partnership, corporation, LLC), number of employees, type of compensation you're receiving (salary, fees, commissions), nature of small business (service, product), where it is located, and your exposure to liability.

Things to think about:

Do you have enough life insurance to protect your family, should you die prematurely? If you have a small service business, your small business is worth Zero when you die. For example, the spouse of a deceased doctor or lawyer can only sell the tools of the trade, not the clients (the true bread and butter of any small service business). If you can predict when you might die, you could sell it ahead of time. Simple and straightforward, every single small service business owner should have at least 7X their gross income to adequately provide for their family.

If your goal is to have a member of your family take over your small business at your demise, are they capable (and licensed) to do so?

What happens if you get ill or suffer an injury and can no longer run your small business? Do you have disability insurance? For a stipulated period of time, you will be paid approximately 60% of your income when you have disability insurance. Depending on whether you claimed the premium as a business expense or not, your benefits might be non-taxable.

Even more important is your answer to this question: Do you have "business overhead insurance"? Of course, even when you are out of commission, your small business still wants to cover expenses like salaries, insurance and utilities. Who will cover those costs? Unless it is an add-on, your small business overhead expenses will not be covered by your disability insurance.

If you have partners, do you have a Buy-Sell Agreement? This will protect your interest in the business, should your partner suddenly die. Here's a great example of this: your partner dies and his wife wants to claim her share of the business. What if your partner's relatives have no idea how to operate the business? Would they be asset or a liability? Wouldn't you simply rather buy out your partner's share of the company? Well, with this additional insurance, you wouldn't have to worry about your partner's family interfering with your small business.

What about "disability buy-out coverage"? Do you have it? If your partner was to become severly disabled, you would be presented with several problems without this particular type of insurance. Do you want to keep paying him (or her) for work he cannot do, possibly for years? You wouldn't have to worry about this situation if you have this type of insurance because your partner would be forced, based upon a previously signed and equitable agreement, to sell his portion of the company to you.

Of course, many of these situations may not occur, but it's your small business. Decide which forms of coverage you deem most important...then speak to a professional who can give you the forms of coverage you require to protect your enterprise.

---

About the Author: Ed Brancheau created The Bank of Green to advise small businesses about subjects like small business liability insurance and to help individuals build wealth through their home equity.

Insuring Your Small Business

Diane Newsom

The number of small businesses starting up in the UK increases every year. The people starting a new business do it for a variety of reasons, to follow a dream; the need to stay at home combined with the need to work, redundancy, the list is endless. The growth of broadband Internet has fuelled this growth in many sectors. Some of these businesses will need financial backing from a venture capitalist and some will not; but all will need a business plan.

You might never need to present this business plan to anybody, even if you don’t it is still wise to have one. This will act as an aide memoir when you feel everything is collapsing about you; or when everything is moving so fast it can get your feet back on the ground.

However enthusiastic or skilled you are in the business you plan to start you are probably not skilled in business practices so your business plan, when presented to a business expert, will highlight the missing knowledge. Without it they do not know what you do not know about business. Anybody you ask to help you finance or support your business, whether it is a bank, stock suppliers or a venture capitalist, will want to see a business plan before even considering investing in your idea.

But what do you put in a business plan and how is it structured. Well you have to show that you have researched the market thoroughly and understand the competition you may face. It has to be well presented and show a severe attention to detail. The plan should reflect a sense of professionalism, with no spelling mistakes, realistic assumptions, and credible projections of cash flow. If you find all this daunting there are web sites, companies and associations out there to help you.

One thing you must remember, the better you plan your venture the better you are capable of solving problems that may occur. The failure rate of small businesses increases year by year, but this is because inadequate time was put in beforehand finalising a business and financial plan for the venture.

You may or may not need financial backing for your new venture. When sitting down and planning out your dream you should work out the finance you need for stock, business supplies, advertising, equipment and wages for the first few months while you build up custom.

Do not forget insurance. Business insurance is for the big boys you might think, not for you sitting at home behind a computer running an Internet marketing concern, cleaning windows or making wedding dresses. The law sees you in the same light as the IBM’s and Fords of this world. Your personal and home insurance will be invalid in most cases.

Some companies offer a special small business insurance package or will tailor make a business insurance package to suit your requirements. Whatever it is you need it will not cost a fortune, it will enhance your business standing and confidence and could save you a fortune. These days it only takes one litigation claim against you to force you out of business and end your dream.

The mainstays behind any small business insurance package are public liability insurance and product liability insurance. It is often a requirement that before you can work on or visit third party premises that you have public liability insurance. This provides cover against death or bodily injury to the public and loss or damage to property not owned by you or in your custody or control. Product liability will cover you against the supply of goods to someone else which through your negligence causes injury or damage. It includes solicitors’ fees, all costs and litigation expenses, damages and claimants costs for which you would be legally liable.

One thing to be reassured of when starting up a new business, nobody wants you to fail. There are companies and associations out there who want to help you. Some are free such as the local chamber of commerce who can provide you with a wealth of information including employment laws, local companies who might need your services and useful addresses. There is the Federation of Small Businesses which has local groups who meet regularly to discuss topics that are affecting them or to see presentations from service industries. On top of these there are local business support agencies, banks, venture capitalists and many more. They are all in business to help their customers as much as you are in business to help yours.

---

About the Author: Diane Newsom writes for the UK search portal Usewho. Please visit us for more information on business insurance.