A LLC designation may fail to fully protect small business owners from potential liabilities. Consider these six alternative policies for your smaller clients.
Successful insurance agents can achieve big windfalls through small business clients. Defined as independent businesses with fewer than 500 employees, 27.9 million small outfits were operating in the US as of 2010, according to the Small Business Administration. Contrast that with organizations employing 500 or more employees, which stood at 18,500.
But just because these companies are smaller doesn’t mean they shouldn’t be as protected as possible. The truth is that a limited liability company (LLC) designation may not be enough to protect your small business clients from lawsuits or other damages. A comprehensive package of insurance policies shields them from financial ruin when legal issues or natural disasters threaten their livelihood.
To obtain funding, comply with regulations, and attract partners and investors, small business owners must hold insurance policies to cover a slew of potential liabilities. As an independent insurance agent, you can curate an assortment of coverages for them designed to meet their unique needs. Below are six of the best kinds of policies that you can use to offer these businesses the best protection for the lowest cost.
1. General Liability: A General Liability policy covers a small business and its employees against claims of physical harm suffered by a third-party on the premises, as well as other allegations, such as libel. Coverage includes the cost of defending the lawsuit, as well as any monetary award if one is handed down. A General Liability policy can be expanded to cover other types of possible damages, such as accounts receivable protection if their clients fail to pay.
2. Product Liability: If the small business makes or sells a product, Product Liability coverage will insure them against impaired products causing injury to a customer or damage to the customer’s property. The policy also reimburses the policyholder for lost business due to the defective product.
3. Errors & Ommissions: If your clients are accountants, medical professionals, financial advisors, or in another licensed profession, they definitely need Errors & Omissions insurance. Also known as professional liability insurance, an E&O policy steps in where a general liability policies leaves off. That is to say that it protects the policyholder if they are sued for professional misconduct, such as breach of contract, negligence, errors, fraud, malpractice, or financial damages alleged from dishonest or improper advice.
4. Property Insurance: Property insurance protects your client’s commercial real estate holdings, as well as equipment, furniture, and inventory in the event of fire or other natural disaster. If your clients have a home-based business, they may mistakenly believe a homeowner policy covers any damage to their business — it doesn’t. Since more 50% of small businesses operate from the home, according to the SBA, business owners need a separate property insurance contract for their company.
5. Business Interruption Insurance: Business interruption insurance offsets any financial losses incurred if your client’s business cannot operate when catastrophe strikes. Impress upon your clients that a closure of only a few days might result in a significant financial strain, so business interruption insurance is a necessity.
6. Key Person Insurance is vital for a small business that depends on select group to sustain its operations. Unfortunately, if one of those persons dies, the business falters. Key person insurance, in the form of a life insurance policy paid to the business, safeguards the firm from any hardship caused by the sudden absence of an integral staff member.
7. Business Owner’s Policy: Another option for your small business owner clients is a Business Owner’s Policy (BOP). This contract bundles several coverages in one package encompassing business interruption, property, and liability insurance. A BOP could also include vehicle coverage and crime insurance.
Small businesses represent an enormous market for insurance agents. You understand their business and have the insurance products they need — show them how these policies protect them against any legal or physical damages and keep them profitable when tough times hit.