Learn all you need to know about small business insurance
There are countless types of small businesses. But regardless of what you do, you probably need small business insurance.
Small business insurance—also called commercial insurance—protects you and your business from losses. And, available through AAA Washington.
A standard policy can cover your building, business equipment and property in a fire and numerous other scenarios. It can also pay damages in case a customer gets injured.
So far, small business insurance may sound a lot like personal insurance. But, there are significant differences, including:
- Small business insurance is much more flexible than personal insurance. It’s customized to fit the nature of the business, its size and unique risks.
- The cost of small business insurance can vary widely depending on the unique risks of the business, the industry and other factors.
Tip: AAA Washington provides a wide range of small business insurance through its partner providers. Connect with an agent at AAA Washington today to discuss your options.
What kinds of small businesses need insurance?
Almost all small businesses need insurance, even ones run at home by one person—a solo entrepreneur. Nonprofits also need commercial insurance. Nonprofits face similar risks as for-profit businesses.
Any small business that offers a service or product that has a chance of causing harm or damage should consider commercial insurance. If you own a tree-trimming business in Tacoma, for example, you’ll want business insurance to protect you in case a falling limb damages a home or hurts someone.
Here is just a sampling of some of the small businesses that AAA Washington can insure through its partners:
- Bakeries and restaurants
- Strip malls
- Handyman services
- Landscapers
- Yoga Studios, gyms, personal trainers
- Wineries and breweries
- Dry cleaners
- CPAs, doctors and dentists’ offices
If you have recently started a home-based business, you should check with a AAA insurance agent to see if you need small business insurance. In some cases, you can add extra insurance to an existing homeowners’ policy, but you’ll often require small business insurance. It is also a good idea to review your policies at least once a year with your agent, particularly if you have expanded the business.
How much does small business insurance cost?
The premiums can vary widely. They will depend, among other factors, on the unique risks of that business, how long you’ve been in business, the size of the company and its assets.
Tip: One way to save on your small business insurance is to raise your deductibles, or the amount that you have agreed to pay out-of-pocket before the insurance company begins to pay a damage claim. The higher the deductible, the lower the cost of the premium. This ensures that the business is covered for catastrophic events, while lowering the cost of the monthly premium. For more money saving options, contact a AAA Washington insurance agent.
What does small business insurance cover?
Small business insurance provides two types of coverage:
- It covers the building and assets, such as the furniture and equipment, from damage from fires, storms and other scenarios;
- It provides liability coverage in case the business harms a customer. For example, if a customer slips and falls on the property and requires medical attention, the insurance would pay that claim.
What doesn’t business insurance cover?
- Small business insurance in Washington won’t cover workplace injuries to employees. Injuries to workers are covered by state administered Workers Compensation insurance. However, you can get this coverage through the state.
- Small business insurance won’t cover sickness or injuries caused by the finished products that a business produces, such as certain packaged foods or cosmetics. If you sell finished products, you will want to add product liability insurance. You can obtain this extra coverage by reaching out to a AAA Washington insurance agent.
- It also won’t cover certain natural disasters, such as floods or earthquakes. You need to get separate flood or earthquake insurance. (Flood and earthquake coverage is available through AAA Washington insurance partners.)
Common insurance add-ons
AAA Washington also recommends the following additional coverage for small businesses:
- Commercial umbrella policy. This provides an extra amount of liability coverage. AAA Washington recommends that a small business carry liability coverage roughly equal to the total value of the business.
- Business interruption insurance. This pays expenses, including employee wages, in the event the business is interrupted. For example, if your Seattle coffee shop has to shut down for a couple of months because of a fire, you could keep the business afloat with this add-on insurance.
- Cyber liability insurance. This protects you in case there are damages to customers associated with a network hack or breach where a client’s personal information is stolen.
Is small business insurance required in Washington state or Idaho?
There’s no state or federal requirement to carry business insurance but business owners typically need to get small business insurance as a precondition for getting a loan or renting space for their business. Plus, customers, partners and clients often require that a business have liability insurance as a condition of doing business with them.
Contractors, for example, typically need to show their customers that they carry liability insurance and a surety bond.
Do I need commercial car insurance?
Generally, yes you do. You’ll need commercial car insurance policies on all vehicles owned by the business. So, a moving van, box truck or fleet vehicle would require commercial auto coverage.
You’ll also need a commercial auto policy if you frequently use your personal car for business purposes. If you’re using your car to transport items, materials or people to a job then you’ll likely need to obtain commercial auto insurance.
If you drive a van to make deliveries, for example, you’ll need commercial auto insurance. Realtors who regularly shuttle clients around to see homes would need it. So do contractors who carry material and supplies to job sites in their personal trucks.
Do home-based businesses need small business insurance?
You’ll probably need business insurance if you run a home-based business. Personal policies may not pay the claim if a work-related accident happens at your home. For example, if a client comes to your house in Wenatchee, slips and falls, the homeowners’ policy may not cover that injury.
Other situations can arise as well. A freelance writer might be accused of slander or libel, or customers’ credit card information could be stolen by a hacker. These situations could result in costly legal action. Business liability insurance can protect you from all these losses and many other scenarios.
Tip: Home-based professionals, like CPAs or freelance editors, are easy to insure. However, it can be more challenging to insure a home-based business owner who is frequently visited by clients and suppliers, such as a hairstylist.
How do I get small business insurance?
Connect with a AAA Washington insurance agent to get a small business insurance quote. The process is similar to applying for personal insurance. The good news is that business insurance is highly flexible. You’ll be able to customize the coverages you get based on the specific needs of your business.
Ideally, you should have your insurance reviewed once a year, particularly if your business is growing or changing. That said, you should always discuss your policy with a AAA Washington agent after any major business change, such as adding a business partner, acquiring new equipment, adding square footage to your office or moving to a new location.
Business insurance can be complex. This is where a AAA Washington agent can help by providing expert guidance as your business grows and thrives.
—Written by AAA Washington staff
—Top photo: AdobeStock
