Small businesses that are run from their home often overlook the need to have commercial insurance because of the low revenues they generate. Your profit is not always indicative of your risk exposure. It’s actually the small businesses that have the lowest revenues and the least resources to cover damages that can most benefit from commercial insurance policies.
Liability has no limit
The biggest concern for business owners is the possibility of personal injury or property liability. Let’s take, for example, an Etsy shop that sells small handmade items like pillows. You sell handmade pillows to customers all across the country through this shop. You make approximately $3000 annually. Although it’s not much, it is a significant amount of money and extremely rewarding.
Let’s assume that some of the pillow designs you have include buttons. Your button-covered handmade pillow is sold to a family with small children. The child takes the button off the pillow, and then swallows it. The next step is a panicked 911 call, an ambulance ride and emergency room treatment. It will take a month to complete the follow-up doctor visits. Your business brings in $250 per month to the parents of the toddler who was injured. They are concerned that they will have to pay high medical bills for what they believe is a defective pillow.
Your pillow sales will not be able to pay for the costs of your legal defense and any other claims. In addition to losing future sales, the parents of an injured infant may spread the word on the flaws in your pillow online.
There are many types of coverage, including product liability and commercial, that can help you to cover all your expenses. There is no monthly cost, but you can still make a profit from your pillow-making business.
The dangers of working from home
Many owners of micro and small businesses operate their businesses out of their homes. They assume their home insurance policy covers any commercial liabilities or damages to the business property. If you operate a business from your home, it can lead to a cancellation of your policy and not happy covered claims. You should either get a separate policy to cover your commercial property and liabilities, or speak with your home insurance company to discuss adding commercial contents coverage.
It’s not about giving up, it’s about being prepared
This example might make you cringe if you’re a micro-business owner who wants simplicity in your home business. It really shouldn’t. All business owners need insurance to be able to pursue their dreams confidently. Insurance is an answer to an exposure problem.
You may need different types of commercial coverage depending on what type of business you run. If a company sells tangible goods online it is important to look into different insurance policies. Cyber risk insurance, equipment breakdown insurance, and property insurance could be beneficial to small businesses that use social media to promote their companies. This will cover any damage to their computers and equipment. There is no one policy that works for all businesses. An insurance agent can help you determine the specific risks that your type of business faces and the ways you run it. Then, you can get coverage.
