You may have been told you need business insurance. But have you ever wondered exactly what is the purpose of insurance for business?
We get it. And rather than give you tired reasons why you need business insurance, we’ve decided to show you the power of small business insurance through these common scenarios.
Whether you’re a handyman, accountant, or anything else, take a look at the ways business insurance can come to your rescue when you need it the most.
Hank has been working as a handyman for five years. He’s built a reputation of being dependable and detail-oriented, and relies heavily on word-of-mouth to land new business.
As a sole proprietor, Hank sometimes lets administrative tasks pile up. He’s been meaning to look into business insurance but hasn’t had a chance to set aside time.
Anyway, most jobs are just Hank and a toolbox, so it’s been easy to put off. He figures it’s unlikely that something will go wrong. If it does, he’ll make it right.
As the business has grown, Hank sometimes brings in a helper, Mike, for larger projects, like his current job — painting the interior of a renovated Victorian house. The client loves the ornate details of the house and hired Hank on the recommendation of a client who said he’s always careful and thoughtful.
As they’re wrapping up the job, the client is checking over the work with Hank. Mike is putting a ladder away when he trips on a rolled-up tarp. As he falls, he lets go of the ladder and it crashes into an original stained-glass window.
In the chaos, the client tries to grab the ladder, misses, and cuts his hand on a piece of broken glass. Hank steps backward, accidentally kicking an open can of paint across the hardwood floor. Mike has a badly sprained ankle and the client’s hand has a deep cut. Both need to see a doctor.
Commercial General Liability (CGL): To help in case of accidents like the broken window, the paint-covered floor, or the client’s cut hand, Hank should have commercial general liability insurance. This is fundamental coverage for small business owners, covering risks like third-party property damage or medical expenses.
Professional Liability: Hank’s angry client may take him to court, claiming negligence. If that happens, professional liability coverage would help, which can cover legal costs, negligence claims, or damage to the business’s reputation due to slander or libel.
Workers Compensation: Many small business owners don’t know that workers compensation insurance is often a legal requirement, even for part-time employees or consultants. If Hank had a workers comp policy, Mike’s medical treatments would be covered; without it, Hank will have to pay those medical bills out of pocket.
Amanda has been growing her career as a makeup artist for a few years. Now she has a great opportunity to rent space in a busy salon. She likes the idea because she’ll still be self-employed, but the salon’s foot traffic means she stands to gain a lot of new clients. It’s a win-win.
But when Amanda sat down to talk with the salon owners, she noticed a clause in the lease that requires her to have business insurance. They won’t rent to her without it.
Meanwhile, she’s still dealing with the fallout from a recent job — a wedding — where she accidentally dropped a container of lip stain on the bride’s dress.
Amanda hasn’t received payment for her work, and she’s been bombarded with angry emails and bills from her former client, who is threatening to take her to court for “ruining” the wedding. Worst of all, a set of expensive makeup brushes were stolen from her kit during the ruckus, and she needs to replace them ASAP.
Amanda knew she was skating by without any insurance. It was an expense she didn’t want to take on when she was starting out. But now? She’s facing unreasonable financial demands from her former client and has to hire a lawyer to help her sort it out.
Commercial General Liability (CGL): This is an easy one. If Amanda wants to rent space in a salon, she’ll likely be required to have CGL. Even though the salon has its own insurance, as a self-employed renter, Amanda needs to have her own policy to cover risks such as third-party property damage or medical expenses.
Professional Liability: If Amanda had purchased a professional liability policy, it would have helped protect her from her client’s claims of negligence. Professional liability also helps cover legal costs and issues like breach of contract. It’s one of the most common policies that makeup artists opt for.
Inland Marine Insurance: Inland marine insurance could have offset the expense of replacing Amanda’s stolen brushes, but without it, she’ll have to replace them herself. Whether it’s as a result of theft or damage, inland marine insurance can help protect the tools and supplies Amanda relies on to do her job.
Lana’s landscaping business is brand new and has been very busy over the summer. She thinks she should have business insurance, but she’s not sure how that works for a seasonal business.
For instance, she sometimes uses part-time helpers off and on. She drives her truck and trailer to jobs all over town. She keeps her equipment well-maintained, but if something were to break – her hedge trimmer, for instance – she’d have to scramble to get it repaired without missing too much work.
Once fall arrives, she’ll button up her clients’ gardens, and business will slow to a trickle.
So far, Lana’s been lucky; she’s never had an accident or damaged anyone’s property, her clients are happy, and her equipment is in good shape. She wants to get coverage for her small business before anything goes wrong, but she has no idea where to start.
Commercial General Liability (CGL): Like Hank, Lana works at her clients’ homes and businesses most of the time. That means she should have CGL, which helps cover costs if a client’s property is damaged or someone is accidentally injured. With the foundation of CGL, Lana can feel safer and more confident as a new business owner, and as her business grows, her coverage can grow with it.
Workers Compensation: Though regulations vary from state to state, there’s a good chance Lana will be required by law to have workers compensation insurance if she hires helpers — even seasonal ones.
She also knows that workers comp is an important safeguard whether it’s required or not, since it helps protect her workers and, in turn, her productivity, livelihood, and reputation.
Business insurance isn't just another expense - it can actually protect you and your employees from the kind of costly claims that could put you out of business. And no matter what your trade or profession, there's a small business policy out there that can protect you from the exact risks you face.
At Simply Business, we make it easy to find an affordable policy that offers comprehensive protection. Here's how to insure your business using our free quote comparison tool:
Having proof of business insurance - especially general liability and workers comp - on file can provide a host of benefits, including:
Business insurance may feel like something you have to get, but here's the thing: it can provide significant peace of mind for both yourself and the people who hire you. As you can see in the above examples, insurance can help protect both mature and new businesses from the unexpected. And that's exactly what you need to stay focused on growing and running your business!
I'm a freelance writer and editor with a passion for entrepreneurship, adventure, and my two rescue dogs. For more than two decades, I've created content for businesses of all sizes, from a small, daily newspaper to a Fortune 100 global giant. I landed my first writing gig at 21, and can't imagine doing anything else.
Daisy writes on a number of topics such as commercial insurance and protecting your business.
This content is for general, informational purposes only and is not intended to provide legal, tax, accounting, or financial advice. Please obtain expert advice from industry specific professionals who may better understand your business’s needs. Read our full disclaimer
*Harborway Insurance policies are underwritten by Spinnaker Insurance Company and reinsured by Munich Re, an A+ (Superior) rated insurance carrier by AM Best. Harborway Insurance is a brand name of Harborway Insurance Agency, LLC, a licensed insurance producer in all 50 states and the District of Columbia. California license #6004217.