Ask a Zenefits Advisor: Do I Need Business Insurance?

Bud Bowlin has been advising business owners about health insurance and benefits for more than 35 years. For his 70th birthday, we gave him his own advice column. Got a burning benefits question for Bud? Send it to [email protected].
Hi Bud,
I run a small business handcrafting wood furniture. Most of my sales are through an online marketplace. I work out of a warehouse, but we do have a showroom area for occasional in-person transactions. My staff consists of me, my son (foreman) and two craftsmen. We share one truck for moving pieces around. When should I think about getting business insurance, and what kind of insurance do I need?
Need Advice To Help Achieve Next Level

Dear N.A.T.H.A.N. L.,

Woodworking is a wonderful field that allows artisans to have a great deal of freedom and flexibility. However, it’s a slippery slope from laxity to liability. Like you and your employees, business insurance is handy, and the right time to get it is before a problem arises!

Workers’ Compensation Insurance

First, most states require businesses to have Workers’ Compensation Insurance. (Not sure about your state? Check this table.) Workers’ Comp protects your workers, but it also protects you by creating a shield against lawsuits that cause financial ruin. Before Workers’ Comp, employees who were hurt on a job had to sue their employers to get help with their expenses. As you can imagine, this took a while, and when the lawsuits finally got in front of a judge, there were additional sums claimed for the protracted “pain and suffering.” Absolutely no one wins when an employee gets hurt on the job, but Workers’ Compensation Insurance helps both the employee and employer avoid a much worse situation.

Business Owners’ Policy

After Workers’ Comp, I’d recommend getting a Business Owner’s Policy, or BOP. A BOP combines General Liability Insurance with Property Insurance and Business Interruption Insurance. A Business Owner’s Policy is ideal for a small business like yours because it can be customized to your needs. A lot of the time, we think about insurance in an abstract sense. This is understandable: who wants to fill his brain cells with car accidents and health problems? However, when it comes to your business, it pays to think about real world scenarios. A BOP can protect your woodshop from loss of income or productivity due to:

• Equipment breakdown
• Natural disasters
• Dishonest employees
• Customer claims
• Electronic data corruption

Commercial Auto Insurance

Then, because you mentioned using a truck to move furniture around, I’d also suggest getting Commercial Auto Insurance coverage. Your personal auto insurance policy may exclude damages to your vehicle when it’s being used to transport goods or conduct a service. If you regularly haul heavy equipment (or tools) and have employees operating the vehicle, you may want to consider commercial auto coverage.

Protection & Peace of Mind

Finally, I want to share a client story that speaks to the “peace of mind” that business insurance provides. One of my clients came to me with a question on behalf of his adult special-needs son who makes wonderful wooden duck decoys at home. Although “just a hobby,” it was really taking off—by word-of-mouth alone—and his son wanted to expand it into a bonafide business. This would mean moving from the family’s garage to a small warehouse, adding more machinery, and hiring a couple of part-time employees. My client supported his son’s vision, but wanted to ensure everyone’s protection if they went forward with the expansion and change of operations.
Well, I’m pleased to report that by using the same advice I gave you above—and of course with the startup enthusiasm of his talented son—my client successfully moved his son’s operation out of the garage and into business! In less than a year, his son hired two full-time and two part-time employees. Business is booming, and now when I see them we talk about providing benefits for those employees!

Moral

Many a new small business has been sunk because it missed the boat on business insurance. As a trusted benefits advisor, my goal is to keep all your wooden ducks afloat!

Got a question about benefits and insurance?

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The answers on Ask Bud serve as basic guidelines and are for informational purposes only. Bud is a treasure trove of knowledge, but is unable to provide legal, tax, or fact-specific human resources advice. Once a question is submitted, Bud and Zenefits reserve the right to accept, reject, edit, modify, or otherwise change it. All content on the Zenefits website, including questions received and answers provided by Ask Bud, are Zenefits property.