The first time a potential client says you must carry $1 million in general liability coverage (or more) to win their business, the tendency is to freak out! But there's no need to worry – the most commonly required insurance is probably much cheaper than you imagine, and we're here to help you figure it out.
Because business insurance is not the most exciting topic, it often falls to the bottom of the Solo PR Pro’s to do list. But while plenty of potential clients will never even ask if you carry it, you shouldn't be surprised to see millions of dollars of business insurance requirements specified as part of a standard contract.
In addition to showing clients that yours is a “real” business and not a fly-by-night operation, the right kind of business insurance policies can protect you from a rainy day and give you peace of mind, too. Though this post is not a substitute for the advice of an insurance professional, we're here to share the good news about the different types of business insurance available, so you can be ready if/when you need it.
Commercial General Liability
This is the “business liability” insurance that clients most often ask you to have. Why? Because this type helps protect them from costly lawsuits if, for example, you injure someone while driving on business on their behalf.
Here's the good news: it's relatively cheap! Fortunately, your homeowner’s insurance carrier can usually provide this for you, and it's typically around $200-$300 dollars a year (likely a small percentage of your fees in the client contract you're reviewing).
Professional Liability Coverage (Errors and Omissions)
Because of its relatively high cost, whether to purchase “E&O” insurance is a tough judgment call for many independent consultants. It’s designed to protect you from any financial loses your work may inadvertently cause a client, due to negligence or inadequate quality controls. It's actually an unpopular type of policy to write among insurers, so you may have difficulty finding a company who even wants to sell it to you.
Here's the good news: When you analyze your options, take into account the industries you serve and the amount of litigation in them against consultants, as well as your level of exposure. Many communications consultants determine that their risk is low, and opt not to purchase this type of insurance.
E&O insurance is best purchased through an insurance broker (as providers vary by state) – ask your homeowner or car insurance provider for a broker recommendation.
Business Property Coverage
This insurance protects your building, its contents, and against loss of income. If you work from home, a certain amount of business property coverage may be included in your homeowner’s policy, so be sure to ask.
Here's the good news: If you need this additional coverage, the same company you work with on your home and/or car insurance can usually provide you with this type – at a discount.
Business Interruption Coverage
This coverage protects against losses due to a temporary shutdown (as with a fire), and provides reimbursement for lost net profits and necessary continuing expenses. Though it sounds good, be sure to crunch the numbers and read the fine print: sometimes you must be out of work for several months before it kicks in.
Here's the good news: You may be better off putting the money this policy would cost into savings (which you could tap in the event of an emergency).
Personal Liability Umbrella (Excess Liability Policy)
This insurance provides protection once the limits of a standard liability policy have been met. Though this is not technically business insurance and it won't satisfy Commercial General Liability requirements, it can sometimes be combined with your other policies at a given insurance carrier (if you have both business and personal with the same company) at a steep discount, giving you more coverage in all aspects of your life.
Here's the good news: Again, you can ask your regular ol' home/auto insurer about these types of policies, and what they cover. I have one through State Farm, and I find it helps me sleep better at night.
What's been your experience with business insurance? Share your lessons learned in the comments!
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