9 out of 10 Small Business Owners Have No Inkling About Small Business Insurance!

What forms of insurance coverage do you want? Well that depends on several different factors. First, there is the size of your small business and how it's organized. Is it a one man sole proprietorship or a 50-employee corporation. Next, you have to take into account how you pay yourself and your employees. Do you pay a salary? Commissions? Then you want to think about your small business' location, your exposure to liability or law suits and whether your small business sells products or services.

Things to think about:

Heaven forbid, but do you have more than enough insurance to protect your spouse and children? If you have a small service business, your small business is worth Zero when you die. For example, the spouse of a deceased doctor or lawyer can only sell the tools of the trade, not the clients (the true bread and butter of any small service business). If you can predict when you might die, you could sell it ahead of time. Simple and straightforward, every single small service business owner should have at least 7X their gross income to adequately provide for their family.

If your goal is to have a member of your family take over your small business at your demise, are they capable (and licensed) to do so?

What happens if you get ill or suffer an injury and can no longer run your small business? Do you have disability insurance? This type of coverage will usually give you approximately 60% of your income, for a stipulated period of time. Depending on whether you claimed the premium as a business expense or not, your benefits might be non-taxable.

More important...do you have "business overhead insurance"? While you're out of commission, who will cover the costs of running your small business like utilities, insurance and salaries? Unless it is an add-on, your small business overhead expenses will not be covered by your disability insurance.

If you have partners, do you have a Buy-Sell Agreement? This will protect your interest in the business, should your partner suddenly die. Here's a great example of this: your partner dies and his wife wants to claim her share of the business. Is it in you best interest to have your deceased partner's family involved in the business? They may not know anything about how to run the business and cause huge headaches. Wouldn't you simply rather buy out your partner's share of the company? Well, with this additional insurance, you wouldn't have to worry about your partner's family interfering with your small business.

What about "disability buy-out coverage"? Do you have it? If your partner was to become severly disabled, you would be presented with several problems without this particular type of insurance. Do you want to keep paying him (or her) for work he cannot do, possibly for years? Well, when you have "disability buy-out coverage", you would never have to wory about this situation because after a period of time, your disabled partner would be forced to sell his share of the business to you.

Of course, it's entirely possible that none of these problems may ever come up but it's your small business after all. The final step is to determine what forms of insurance coverage you believe you want to protect your small business and then call and speak to a professtional who can set you up.

About the author

Edward M. Brancheau created The Bank of Green to advise small businesses about subjects like small business health insurance and to help individuals build wealth through their home equity.

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