Thursday, October 29, 2009

Insurance for Small Biz

Another great suggestion to come out of last night's small business start up presentation was the type of insurance that may be necessary for a small business.

Depending on the legal business structure, you may be personally liable for any claims of damage, defective product, breakage, loss of client revenue, etc.  Examples include computer consultants that should probably carry errors and omissions (E&O)  insurance.  This is an insurance form that protects the insured against liability for committing an error or omission in performance of professional duties. Generally, such policies are designed to cover financial losses rather than liability for bodily injury and property damage.*

A second general common business insurance policy is broad form comprehensive general liability (BFCGL) endorsement.  This insurance is a comprehensive endorsement to be attached to pre-1986 editions of the standard general liability policy that provided coverage enhancements including blanket contractual liability; personal injury and advertising liability; premises medical payments; host liquor liability; fire legal liability on real property; broad form property damage liability, including completed operations; incidental medical malpractice; nonowned watercraft liability; limited worldwide coverage; additional persons insured (employees); extended bodily injury coverage; and automatic coverage for newly acquired organizations.*

Insurance policies are vital if:

A) You have personal assets you might lose in a legal judgment

B) The legal structure is a Sole Proprietorship or S-Corp where no corporate protection exists

Consider carefully your risks and whether you can sleep at night without adequate coverage.


The author of this article, thesmallbizpro, and affiliated entities are not certified insurance agents and claim no expertise or authority in the insurance industry.  Readers of this article are strongly encouraged to contact an appropriate insurance broker, agent, or appropriate entity to review individual circumstances.  This article is solely an opinion of the author who holds no liability for insurance options chosen by an individual, individuals, or organizations.

* Insurance definitions copied from the glossary at 


  1. AJ great points to bring up. While business needs for insurance vary by industry it's actually a real selling point for some. Show me a machinery moving company without insurance and I'll show you a fly by night operation. Something to consider when looking into business insurance, if you look at the price tag and think to yourself, there's no way I can afford this...ask the agent if you can finance the insurance. You might think financing your insurnance is insanity, but it's actually quite common. For the non business owner that thinks the boss/owner is lining his or her pockets on the backs of others, this little fact should be a clue.

    This however brings up a question that some business owners might be thinking these volatile economic times, what might a business owner do if the insurance policy has been financed, the agent keeps the payout from the finance company and then goes belly up? For Illinois the Illinois Department of Insurance can provide some assistance, but perhaps you can offer readers some insight on what options they have.

  2. Great points, Craig. I did not know that insurance financing was that common. Kind of a scary thought!

    This also sparks an idea for another article about bonding vs insuring.


  3. Thank you for this post, and an excellent refference site for a dictionary on finance terms.