Top Small Business Insurance Myths

Whether you’re getting your information from a friend or your broker, it’s important to understand the fundamentals of small business insurance – and to correctly identify the many myths surrounding it. From the preconceived notion that your personal insurance will cover potential business-related claims to assuming your personal car insurance will cover your vehicle when you use it for work purposes, you need the correct information to ensure you’re thoroughly protected.
 
Put simply, a comprehensive small-business insurance plan is your best defense against a costly claim that can have a devastating impact on your company. Here we debunk the top business insurance myths to protect your business.
 

Myth #1: My home insurance policy covers my home-based business.

If you operate your small business from your home, it’s easy to assume that your home insurance will cover you in the event of a business-related claim. In most cases, this is false. While your home insurance policy might cover some of your business, and might offer you the option to purchase extended insurance, a separate business policy is the only thorough defense against unforeseen damages and liability.
 
Discovering this the hard way, after trying to make a claim through your home insurance, for instance, can be an incredibly frustrating and ultimately futile exercise, leaving you on the hook for any expenses related to lost or damaged equipment and client lawsuits.
 
A simple general liability insurance policy or business owner’s policy can give you the protection you need to guard against damages to both business property and injuries clients may suffer under your purview – like slander or a lost time claim.
 

Myth #2: I don’t need additional coverage if I use my personal vehicle for work purposes. 

Your personal auto insurance likely won’t cover you in the event of a claim while using your vehicle for business purposes. Something as simple as driving to Staples or to meet a client can wind up costing you substantially without the right coverage. It all comes down to the vehicle’s primary use. If you mostly use your car for personal purposes, your insurance likely already covers you for the occasional business use. But if you use it mostly for business purposes, you’ll likely require commercial coverage.
 
In a worst case scenario, your insurance company could drop your personal coverage because you weren’t completely forthright in disclosing your commercial activities.
 
Talking to one of our brokers can help clear up any ambiguity surrounding your vehicle’s coverage.
 

Myth #3: My contracts with clients will prevent me from incurring lawsuits.

While a contract is convenient in outlining business arrangements, it doesn’t protect you outside its limits. For example, if you breach your contract you can be exposed to the risk of a lawsuit. Something as simple as missing a deadline or failing to deliver any element of the contract can void it completely, leaving you vulnerable to legal action.
 

Myth# 4: If I get sued I can just close my business.

A lawsuit can arise anytime a client or customer suffers injuries due to your products or services. While it might be tempting to consider simply shutting down your business in the event of such a claim, it’s not quite that simple. The hard truth is that courts tend not to care whether or not your business is operational while deliberating on a case. Even if you close your doors in an attempt to escape the financial consequences of a lawsuit, you could find yourself forced to cover settlements from your personal accounts.
 

Myth #5: My business is too small to require protection.

You might not think you need a separate business-insurance policy – it’s especially easy to fall into this trap if you only service a few clients or operate your business on a part-time basis. But the reality is that not protecting yourself or your business can quickly turn into a costly and time-consuming lawsuit or claim. Most personal insurance plans don’t cover you in the event that equipment you use for your business – like laptops, printers and even vehicles – is damaged or lost. If you’re sued by a client for the services and/or products you provide, your homeowner insurance will not provide adequate coverage. 
 

Myth #6: I need insurance for each and every client.

Here’s the good news: in most cases, your business insurance policy will cover multiple clients without any need to purchase additional coverage. That’s because most policies define your coverage broadly. With that said, it’s advisable to confirm this with your insurance company.