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

By Author: Ed Brancheau
Total Articles: 9
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What forms of insurance coverage do you require? 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 require 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:

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. Doctors and lawyers are the best example of this because when they pass away, the spouse can't sell the service or the clients (the real meat of the small business.) All they can sell is the equipment that was used for the small business. You can sell your small service business prior to your death, if you can predict when that may occur. Otherwise, all small service business owners should protect their families ...
... with a minimum coverage of 7X gross income.

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?

Do you have disability insurance, in case you're incapable of running your enterprise because of illness or injury? For a stipulated period of time, you will be paid approximately 60% of your income when you have disability insurance. The benefit may be taxable or non-taxable (depending on whether or not you deducted the premium as a business expense.)

More important...do you have "business overhead insurance"? Who will cover the costs of running your small business (utilities, insurance, salaries) while you're out of commission? Unless it is an add-on, your small business overhead expenses will not be covered by your disability insurance.

Got business partners? Do you have a buy/sell agreement? This will protect your interest in the business, should your partner suddenly die. 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"? If your partner becomes severely disabled, what would you do? How would you feel if you had to keep on paying your partner for years to come when they cannot do any work because of their disability? After a period of time, this type of coverage would force your disabled partner to sell you his share of the business, based on a previously signed equitable agreement.

Of course, many of these situations may not occur, but it's your small business. The final step is to determine what forms of insurance coverage you believe you require to protect your small business and then call and speak to a professtional who can set you up.