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Are You Properly Insured?:
Some Basic Categories Of Insurance
By Stephen Windhaus
When starting a small business one of the last things many entrepreneurs consider is the purchase of insurance. Many have such tight budgets they just can't see themselves buying something that does not go directly towards operating the business or selling the product or service. Others assume their type of business is not the kind that will bring any risk or harm. That appears especially true of many home-based businesses. The omission of insurance becomes even more easily overlooked when the business is a proprietorship.
Please don't fall into a false sense of security believing you are unlikely to have a need for insurance protection. The budgeting philosophy of not spending money on something that does not directly increase the opportunity to make sales needs to be reconsidered when you give thought to some of the types of conditions that could force the closure of your business, even if sales and profits are going well.
First consider the obligatory. If you have employees, there is the obligation to pay workers compensation premiums. These premiums are then funneled to a fund that finances the benefits awarded to employees who are temporarily or permanently disabled due to injuries on the job. You can anticipate paying a periodic premium to that fund as directed by your state's department of labor and employment security. As a first-time employer you will be assessed a pre-set premium based on number of employees, wages and type of business. As time progresses, if you have little or no on-the-job injuries, the premium will be reduced. That's your reward for maintaining a safe workplace and not contributing to the cost of financing the unemployed due to injury. To learn more about workers compensation in your area go to the National Labor Management Association's web site for a hyperlink to your state.
Perhaps one of the most overlooked policies is life insurance. As a proprietor you need to consider the well being of loved ones who depend on your livelihood, in part or whole. The policy should account for sufficient coverage to pay off your liabilities, including taxes, and any costs to liquidate or reorganize in your absence. You also want to account for immediate cash needs of living necessities for your loved ones. In many partnerships life insurance is not an issue. If a partner dies the business is dissolved. The remaining partners, however, will be left to either create a new partnership or pay off all indebtedness from existing assets in the case of liquidation. In privately held corporations where two or more stockholders represent different personal estates the life insurance policy takes on greater ramifications. Each stockholder should see to it his or her policy is designed to protect the personal estate.
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