Taxes Made Simple

One excellent piece of advice that many small business consultants give their clients is to consider using an insurance policy as a means of further protecting oneself from liability. Depending upon the situation, it may even be cost effective to use insurance instead of incorporating or forming an LLC.

What Kind of Policy?

Of course, when attempting to determine whether
or not you’d want to get an insurance policy for your business, the first thing you need to figure out is what type of policy to shop around for. Generally, the best way to do this is to attempt to think of all the things that could go sufficiently wrong that they might result in a lawsuit.

When it comes to protecting yourself from liability to other parties, there are three primary types of insurance policies you should consider for your business:

1. General liability insurance,
2. Product liability insurance, and
3. Professional liability insurance (often referred to as “errors & omissions insurance” or “malpractice insurance.”)

General liability insurance covers things such as a person coming into your retail location and slipping and falling on a just-washed floor. Product liability insurance covers precisely what it sounds like: liabilities caused by the product(s) you create and/or sell. Professional liability insurance covers you in case you make a mistake or neglect to do something important while providing services to a client.

Where to Find It?

Obviously there are two primary ways to go about looking for an insurance policy:

1. Go online and do a search for “business insurance quotes Illinois” (or whatever state you’re in), or
2. Use an insurance agent.

There’s nothing wrong with either approach. It just comes down to personal preference. If you like shopping online in general, you like being able to compare quotes from different companies, or you don’t want anybody calling you at home, do it online.

On the other hand, insurance policies can be exceedingly complex, and it’s helpful to have an expert there to explain it for you. Also, it’s possible that an insurance agent may be able to get you a better deal from her company than you’d be able to get by doing it online. Without a doubt, the best way to find an insurance agent is to ask friends and business associates if they have one with whom they’re satisfied.

Compare to Costs of Forming LLC/Incorporating/Etc

If you don’t think it’s necessary to form an LLC and get an insurance policy, a reasonable way to choose between the two would be to simply compare the cost of doing each of them. Be sure, in your comparison, to include ongoing costs of having an LLC, not just the cost of forming one. For instance, if your state imposes an extra income tax on LLCs, be sure to take that into account.

Simple Summary

• Many times, it may be wise to get an insurance policy in order to help limit your potential liabilities from your business.
• The three main types of insurance policies for limiting liability from a business are general liability insurance, product liability insurance, and professional liability insurance.
• There’s really no right or wrong way to shop for an insurance policy. Do it online if you want, or use a well-recommended insurance agent if you think you could use some help.
• If you are trying to compare the costs of getting an insurance policy vs. forming an LLC, be sure to take into account the potential ongoing costs of having an LLC.

For More Information, Take a Look at My Related Book.

See it on Amazon now.

A testimonial from a reader on Amazon:

"Quick and easy read. No fluff, just straight to the point and gives you more helpful information that you might imagine. If you are looking to get the bottom line information you need to start your business right then this book is a must have." R.L. Muhammad

Read more reviews on Amazon.