What Ninety Percent Of All Small Business Owners Don't Know About Small Business Insurance!

By Author: Ed Brancheau
Total Articles: 9
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What varieties of insurance coverage do you need? Well that depends on several different factors. First, there is the size of your small business and how it's organized. Is it a one man sole proprietorship or a 50-employee corporation. Next, you have to take into account how you pay yourself and your employees. Do you pay a salary? Commissions? Then you need to think about your small business' location, your exposure to liability or law suits and whether your small business sells products or services.

Things that you should consider:

Should you die prematurely, do you have enough life insurance to protect your family? Why is this so important? Well, if you have a small service oriented business, it will be worth $0 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. But that's not very likely, so you and every small service business owner should make sure that you protect your family with at least seven times your ...
... gross income. So, if you make $100,000 per year then you should have over $700,000 in insurance.

But say that at the time of your demise, you want to have a family member take control of your small business. Well, there are two questions that you have to ask yourself. One, are they capable of taking over and, two, are they licensed?

What happens if you're not capable of running your small business because of an injury or a dehabiltating illness? Are you covered with enough disability insurance? This type of coverage will usually give you approximately 60% of your income, for a stipulated period of time. On top of that, your disability benefits could be non-taxable or taxable depending on whether you claimed the premium as a business expense.

Even more important is your answer to this question: Do you have "business overhead insurance"? While you're out of commission, who will cover the costs of running your small business like utilities, insurance and salaries? Disability Insurance will not cover your small business overhead expenses, unless it is an add-on.

If you have partners, do you have a Buy-Sell Agreement? Well, if you or your partner should suddenly die, your interest in the business will be protected. Here's a good example: your partner's wife wants to claim her share of the business after your partner dies. Is it in you best interest to have your deceased partner's family involved in the business? They may not know anything about how to run the business and cause huge headaches. 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.

Do you have "disability buy-out coverage"? What would you do if a partner becomes severely disabled? 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, it's entirely possible that none of these problems may ever come up but it's your small business after all. Now, all you have to do is speak to a professional to determine what varieties of insurance coverage you need to protect your small business.