I don’t need no stinking insurance!

The topic of business insurance is an important one, and something I recommend you consider carefully. I also strongly recommend you speak with an insurance broker who can give you much better advice.
Many new consultants mistakenly skip what they consider to be an unnecessary expense in their fledgling business (where cash is king), but that can be very dangerous and kinda dumb.

There are basically seven different types of insurance:
1. Property Insurance: This insures against loss or damage to your business equipment, or the property of others when they are in your place of business. Many consultants assume – incorrectly – that the homeowner’s insurance will cover all of their valuable materials and equipment in the event of damage or loss, but this is not always the case. Many personal homeowners policies have exemptions for items belonging to a legitimate business run out of the house.
2. Liability Insurance. Given today’s litigious society, I don’t think I need to explain why liability insurance is a good thing. The general public’s view is that if you own your own business, you must be rich. Liability insurance protects you against lawsuits for negligence basically. Even if there is no merit to a case, it can cost you more in defending a spurious suit than you can afford.
3. Casualty Insurance. Property and Casualty insurance cover slightly different things. While Property insurance will cover the loss of tangible property (fire, theft, floods, etc.), casualty speaks more to things like loss of business, business interruption, continuance of business, etc. A fire at your home office may destroy your computer, but may not cover the loss of revenue due to all the files you lost.
4. Commercial Auto. Your personal auto policy may not cover loss or liability associated with your vehicle if you own a business. I’ve seen a few cases where the insurance company claimed a consultant used his vehicle primarily for work rather than personal, and refused to cover losses associated with an accident.
5. Healthcare Insurance. This is unlikely to be of concern in any early stage practice, but if and when you get to a point where you hire employees, this would be a requirement. That said, there are attractive group policies out there that can provide you with discounted health insurance through your business, that lower the costs of carrying a private health insurance policy.
6. Life and Disability Insurance. This would only be of interest if you share the company with more than one shareholder. Were you to be injured and unable to work in the business, or died, such a policy would pay out to the remaining shareholders of the business to cover that loss of key personnel. I’ve seen some cases where the remaining shareholders use proceeds from such a policy to buy out the shares granted to the survivors of the deceased business partner.
7. Worker’s Compensation. If and when you get to the point where you real employees (not contracted 1099 workers), you will be required to open a worker’s compensation policy by most States in the United States. Other countries have similar requirements. Not something to waste any time on until you grow to that point, though.

I highly recommend you investigate and purchase the first two types of insurance right off the bat (Property and Liability) with Liability being the most important in my opinion. Casualty will likely be bundled with Property, so the third insurance listed above would be the next most immediate thing to consider. The rest are valuable, but only at certain stages of your business so you can revisit them when the time is right.

What, if any, insurance do you have and has it helped?

About Jay Niblick

Jay Niblick is principal and co-founder of Innermetrix and best selling author of What's Your Genius and The Profitable Consultant. Learn more about Jay Niblick here and connect via Twitter, Facebook, Google+ and LinkedIn.

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