Many business owners, rushing to get their service or product launched, put off thinking about their business insurance needs until it's too late. Lacking adequate coverage, they may find themselves out of business altogether because of a fire, an auto accident, employee embezzlement or theft, or injuries suffered by a customer on their premises.

Surveys suggest that 40% of small businesses fail to carry any insurance at all, in many cases because the owners believed they could not afford coverage. Owners with unincorporated businesses--proprietors and partnerships--face added hazards, notably the risk the loss of personal as well as business property.

What Insurance Should You Carry?

A knowledgeable insurance broker can help you review the kinds of policies you will need, depending on the nature of your business. For example, in a home-based, professional service business, your homeowner's policy may provide adequate fire, theft and liability coverage. But you may want to get added coverage recoup any loss of business income in the event of a fire, along with coverage for legal expenses as well as damage awards in the event clients were to sue you claiming the professional advice you provided caused losses to them.

Businesses having substantial fixed assets will obviously require more property and casualty coverage, and this coverage should be reviewed periodically to ensure that proceeds will cover equipment and facility replacement costs--not historic costs. Also, businesses involving operations that subject customers, suppliers or employees to personal injury hazards should have adequate liability coverage, as should businesses that sell manufactured goods.

While you may not be able to afford all the insurance you need, you can set priorities. Once you do that, a knowledgeable broker can assist in fine-tuning the priorities on the assessment of different risks facing your business. Good agents will be knowledgeable of actuarial statistics and the typical amount of coverage for a business of your kind.

Key Points to Keep in Mind

• The standard small business owner's policy (BOP) will have coverage for fire, wind damage, and theft of property, along with liability coverage in case of injury caused to purchasers of your product or to those transacting business on your property. Income loss because of business interruption is also part of most standard policies.
• Because business needs differ according to the type of business, many insurers provide BOPs tailored to meet the special needs of an industry. However, if your business employs more than 50 workers or exceeds a certain volume of sales, you may have to buy each type of coverage separately.
• Worker's compensation, life and disability insurance, professional liability and health insurance are not included in the standard BOP--but you may well require some or all of these additional coverage features.
• BOPs are not available for professional workers--for example, CPAs, attorneys and consultants.
• Most states require that you carry Worker's Compensation insurance to cover employees injured during the course of work, although some states waive this requirement if you have only a few workers.

Because of the wide variety of insurance products and features, along with different state statutory requirements, you should seek out a competent insurance professional to review your needs. For example, you may find that you have been paying higher Workers Compensation than was called for simply because your employees were not classified correctly by your broker when you first applied for coverage--and they were mistakenly included in a higher risk category.

The money you save by carefully appraising your insurance needs, or reviewing your current costs and needs on an annual basis, may enable you to offer employees additional coverage--perhaps health or disability benefits that you were unable to afford before.