I started Wise Insurance Group in 2011 during the height of the “Great Recession” when the jobless rate was about 10% and companies were still shedding jobs. I’ve talked with numerous people, all across the Dallas / Fort Worth area, who’ve gone out on their own over the past three years. These solopreneurs include consultants, graphic artists, web designers, tax preparers, caterers, photographers, contractors, freelance writers, PR gurus, marketers, bloggers, and much, much more.
The American dream of starting, running, and growing your own company is alive and well and growing. According to an article written by Jason Nazar and published in the September 2013 edition of Forbes there were 22.5 million nonemployer (solopreneur) firms in 2011. There are almost 28 million small businesses (companies with less than 500 employees) with 52% of these businesses being home based. Regardless of what type of business you started or where it operates, there are several commercial insurance items that need to be considered.
Business Personal Property includes furniture, computer equipment, phone (smartphone or desk phone), software, and anything else you use to outfit your office and conduct business. If the business operates from home then the home insurance policy may or may not cover this. Optional business pursuits coverage may need to be added to the home policy to fully protect the business personal property. If the home insurance policy doesn’t cover it, this coverage can be included with a commercial insurance policy such as a business owner’s policy or BOP.
If the business operates in an executive suite or some other leased space, the property manager will require the owner or company to carry general liability (GL) insurance as outlined in the terms of the lease. A GL policy would work, however, a BOP provides both GL and business personal property for about the same and less cost.
General Liability insurance protects the company in the event someone sues for negligence such as a fall in the office or shop, a breach of contract, issues with the product or service provided, etc. If the company operate from a home based office, the personal liability portion of a home or renter’s insurance policy will not cover a business liability claim. Many carriers will refuse to write a home insurance policy where people are coming consistently and regularly into the home as a part of the business operations. In these instances, I highly recommend a commercial GL policy or BOP. If the company operates out of a leased space, there will be a requirement for a GL or BOP policy as a part of the terms of the lease agreement.
Professional Liability or Errors and Omissions (E&O) insurance protects solopreneurs that provide a service for a fee. E & O insurance is designed to provide coverage for judgments, settlements, and defense costs if the business owner is sued for delivering or failing to deliver a service that meets the expectations of a client. I recommend E & O coverage to anyone who provides a service for a fee including consultants, wedding planners, freight forwarders, software developers, web designers, web hosting companies, photographers, advertising agencies, public relations professionals, commercial printers, and many more.
Many solopreneurs start and continue to run their businesses without any insurance coverage. The reason cited by many is cost. There are many factors that go into how the premium is determined including industry type, prior losses, number of employees, annual revenue, and the amount of property owned by the business. Many commercial insurance policies can be obtained for a few hundred dollars which is pretty small when compared with what would it cost you and the dream you’ve worked so hard on building, if you suffered a loss or law suit.
What do you think? Share your comments, questions, and experiences with me in the comments section of our blog, or on our Google + and Facebook pages. I’d love to hear from you!