Building a business can be a rewarding experience, but it isn’t without its risks. Part of owning a small business is learning how to manage these hazards so they don’t hold you back.
Risk management starts with understanding the types of risks you may encounter. Every business is unique. The risks faced by an accountant are different to those of a personal trainer, but you may also be confronted with different challenges than someone with the same occupation.
Here are four types of risk that many small businesses may encounter, along with business insurance products that can help protect your livelihood should you ever need to deal with them.
1. Reputational Risks
In business, your reputation is everything. A mistake may be small, but it could create big headaches for your clients or customers. This in turn may put your professional reputation and business in jeopardy.
If you provide a professional service or give advice based on your expertise, you are at risk for reputational damage. Careful work can help you avoid negative hits to your professional reputation; however, you can still be the subject of baseless claims. It can be costly to clear your name in court, even when a claim has no merit.
A Professional Liability insurance policy (also known as Errors and Omissions or E&O insurance) is an essential policy that protects you and your company in case of a lawsuit due to alleged professional wrongdoing.
This type of business insurance can help shield your small business against claims of:
- Inaccurate advice
- Missed deadlines
- Undelivered services
- Professional negligence
2. Third-Party Lawsuits
Working with the public exposes your small business to more than just reputational risks. Injuries sustained by people visiting your premises—including customers, clients, and vendors—could potentially result in a lawsuit.
Additionally, you could also be sued or required to compensate a client if you damage their property. This might happen accidentally while visiting their home, office, worksite, or other location. Damage may also occur if you are working on or storing their property in your premises.
General Liability insurance, also referred to as Commercial General Liability (CGL) or “slip and fall coverage”, can protect your business against bodily injury or property damage lawsuits from outside parties.
This type of business insurance policy may be useful if you:
- Visit your clients’ workplace
- Have clients visit your workplace
- Regularly interact with outside parties
- Use third-party locations for business-related activities
- Provide a physical service to your customers
- Sell a physical product
3. Employee Injury
When you employ someone, you are responsible for their health and wellbeing on the job. This includes handling workplace injuries and illnesses.
Creating a culture of workplace safety, including prioritizing regular safety training, can help your business avoid work-related injuries. However, accidents happen even at the safest places of work. Workers’ compensation claims and lawsuits can be expensive, regardless of who is ultimately at fault.
Workers’ Compensation insurance protects you against medical expenses and lawsuits that can arise from employee workplace injuries and illnesses. It could also pay lost wages as a result of the work injuries that an employee sustains.
This type of business insurance covers costs resulting from a workplace injury or illness, such as:
- Medical bills
- Replacement wages
- Disability support
- Death benefits
- Legal fees
- Settlements and judgements
4. Operational Risks
In life, anything can happen. Running a small business is no different. There are many events that can impact your business, making it hard to work or requiring you to temporarily close shop.
An interruption to normal operations could cost you money, both in repairing the situation and from lost revenue. Common operational risks include disasters such as a fire or flood, as well as more everyday events, like essential equipment breaking down or needing repairs. Any of these could negatively affect your ability to do business and earn money.
A Business Owner’s Policy (BOP) is a convenient and affordable way for small business owners to protect against several of their most common exposures. These policies combine General Liability insurance with other types of coverage, such as business interruption and business property damage.
Your BOP policy may include coverage such as:
- Business interruption
- Equipment breakdown
- Non-owned and hired auto
- Third-party property damage
Find business insurance with BizInsure
There is always risk when you are running a business. As a small business owner, you can take steps to lessen the impacts that they may have on your operations, including buying business insurance.
BizInsure makes is easy to find business insurance to fit your industry or occupational needs. Enter your details just once to compare multiple types of policies from top U.S. insurers. Buy online or over the phone and receive your policy documents instantly via email.