As an entrepreneur, you accept a significant amount of risk. You may forego reliable income as you devote your daily life to get in your concept off the ground. You can have personal liability in some scenarios if the business fails or faces lawsuits. If the company goes under, you will lose your investment in it and likely have a lengthy process of reentering the workforce.
Of course, there are innumerable benefits to entrepreneurship. You are your own boss, meaning that you decide what money you make and what schedule you work. You have control over the job you perform, meaning you don’t have to compromise your personal sense of ethics. You can also pursue your passion, which is not something many people can do.
While you can’t completely protect yourself from the financial risks of a failed business enterprise, you can shield yourself from the liability that comes from running a business. Obtaining proper business insurance, including the three common forms of insurance below, will help you minimize the financial risks you take by starting your own company.
A general liability policy
Many businesses have a general business liability policy. This coverage may extend to everything from your company’s facilities to the products that you produce. General policies can be a good starting point for someone who is still unsure about what their business will become in the next few years.
Product or service-specific coverage
Whatever your business intends to do to make money may be a source of risk. If you provide guidance as a real estate agent, you may need Errors and Omissions insurance in case you make a mistake that negatively affects a client. If you rent a manufacturing facility, you may need product defect coverage. This coverage protects you from consumer claims if something goes wrong with what you sell or provide to the public or other businesses.
Employee-related coverage
If you have workers at your company, you will likely need workers’ compensation insurance. Some companies go further and take out individual policies on key workers so that they will have compensation if that employee becomes unable to do their job. Companies may also choose to invest in business Interruption insurance as a way of guaranteeing that they can pay salaried workers their wages if they have to temporarily cease operations.
There are other, more specialized forms of insurance, but these three categories are typically a good starting point for those seeking to limit their own liability as they move forward with an entrepreneurial enterprise. Learning more about how to protect yourself as you start a business will benefit you now and potentially in the future if you ever face a claim from an employee or a client.