It’s been said that “ignorance is bliss.” However, don’t tell this to frustrated and rueful business owners who pay a steep price for believing any of these seven costly myths about business insurance:
Myth: Home insurance will cover a home-based business.
Fact: Home insurance policies typically don’t cover business-related losses or damage. So, if there’s a flood, fire, theft, accident or other unfortunate event, then costs will be out-of-pocket and could be enormous.
Myth: General liability covers all possible risks.
Fact: General liability covers some risks — but certainly not all of them. For example, it typically doesn’t cover losses incurred due to a cyber security attack, damage to vehicles used for business purposes, and more.
Myth: Business insurance isn’t necessary if there are zero liability clauses in an agreement.
Fact: Many agreements state that contractors or vendors cannot be sued if they meet all of the terms and conditions. However, they can (and typically will) be sued if they breach any obligations. Without sufficient liability insurance, the costs could be steep and potentially catastrophic.
Myth: Workers’ compensation insurance isn’t required if there are no employees.
Fact: Some states mandate that all businesses — regardless of whether they currently have employees or not — have valid workers’ compensation insurance. Getting the facts vs. making assumptions is critical to avoid steep fines and lawsuits.
Myth: Business insurance isn’t necessary if work is being done off-site at a client’s location.
Fact: If a contractor, consultant or employee damages a client’s property (like drives their car into an LED message center from the Landmark Sign Company), then it’s not the client’s responsibility to pay for the damages.
Myth: Business insurance isn’t necessary if professional advisory services are being offered.
Fact: Businesses can be successfully sued for negligence if their advice is found to be incompetent and results in a hardship. Without liability insurance, any settlements or court judgements must be paid out-of-pocket.
Myth: A standard vehicle insurance policy covers both personal and business use.
Fact: In most cases, separate insurance is required when a vehicle is used for business purposes.
The Bottom Line
Nobody likes buying insurance — even insurance companies and brokers acknowledge this. However, given the potentially massive risks and costs, making sure that your small business is suitably covered should be viewed as essential instead of optional. The good news is that you can deduct your premiums to offset your costs. Also remember to shop around and compare apples to apples when evaluating options. No, business insurance isn’t exciting. But sleeping well at night is certainly satisfying.