The Pros and Cons of Business Insurance for Solo Entrepreneurs

This is a guest post from Carol Wilson who writes for business insurance reviews. She contributes articles about a variety of marketing, business, stock market, and small business topics. She can be contacted at: wilson.carol24@gmail.com.

Credit: Alan Cleaver (CC)

For spirited indi­vid­uals who are just beginning their venture into self employ­ment and small business ownership, one of the last things we take into consid­er­a­tion is small business insurance. Caught up in the excite­ment of new employees, devel­oping a brand, creating a website, finding a customer base, devel­oping a marketing strategy, and so much more, boring things like insurance are typically the last thing on our minds. However, things like lawsuits, thefts, injuries, and any other kind of damage have to be a high priority for new business owners. Small business insurance is designed to protect busi­nesses against oper­a­tional loss. Many business owners question whether business insurance is really a worth­while venture for young, small online busi­nesses. Because online busi­nesses typically have a very low start-up capital, it is reason­able for small online business owners to be skeptical of (sometimes) expensive insurance policies. However, there are plenty of reasons that small business insurance is an important venture in your new small business.

Basics of Business Insurance

There are several different types of business insurance available that cover virtually any risk that a business could possibly face. For small busi­nesses, however, there are generally four basic cate­gories that cover most of the risk faced by small business owners: profes­sional liability insurance, product liability insurance, general liability insurance, and commer­cial property insurance. These four cate­gories protect different aspects of small businesses.

• Commer­cial property insurance is very similar to tradi­tional homeowner’s insurance, covering buildings, struc­tures, and the contents within the property.
• General liability insurance covers small busi­nesses against legal claims for injuries, accidents, libel, or slander.
• Product liability insurance is for busi­nesses that are focused on manu­fac­turing, distri­b­u­tion, or retail. This insurance protects the assets of a small business, defending a company against claims of defective or malfunc­tioning products.

Cons of Purchasing Business Insurance

The most obvious con to purchasing small business insurance is obviously going to be the price of the insurance policy. The cost of small business insurance depends on several factors. Some of the most basic factors include, how large your business is, how many employees you have, the nature of your business, and much more. While the cost of business insurance can be extreme at times, often it is necessary or even required by law. The question for small business owners, espe­cially those operating online, is whether insurance is worth the cost or not.

Pros of Purchasing Business Insurance

The biggest pro of business insurance is protec­tion. Small business insurance provides a company with thorough protec­tion from issues that are out of their control. Sadly, when things go bad in the business world, it is often because of issues that business owners cannot control, such as lawsuits or financial losses. For this reason, business insurance is likely a worth­while invest­ment if you want your company to withstand the unex­pected. There is so much risk that already exists in the business world (espe­cially with small online busi­nesses), that the cost of business insurance is probably worth the reas­sur­ance that you are covered.