When starting a small business, it can be confusing to understand the different types of insurance and bonding you need. However, understanding the differences is vital to protecting your business and legal. So, let’s do a quick rundown of the definitions of being insured, licensed, and bonded and how they differ so you can ensure your business is compliant.
- Types of Business Insurance
Property insurance
For small business owners, property insurance is critical. This coverage protects their physical and tangible assets from loss or damage due to covered risks such as fire, theft, vandalism, and storm damage. It can also lessen personal liability if customers or visitors become injured on the premises.
Other benefits include recovering lost income from an insured incident, renting alternate space during repairs or restoration, and protecting expensive equipment that may be vital to running the business. Property insurance is a wise investment for small business owners as they look to ensure the long-term health of their operations.
Worker’s Compensation Insurance
Worker’s compensation insurance provides financial protection if an employee gets injured or sick from conditions related to their job. With this type of insurance, small business owners won’t have to worry about substantial medical bills or liabilities in the case of an unforeseen tragedy.
It ensures that affected employees are adequately cared for and helps ensure safety rules are enforceable and comply with the law. This insurance can be difficult and expensive to acquire but remains a critical component of keeping everyone safe in any work environment; small business owners should always hold worker’s compensation insurance,
- Business Licensing Overview
Licensing is integral to running a successful business as it validates that you have met all requirements for operating legally in your state. Licenses are required for companies depending on the type of services they offer. Depending on the state where your business operates, several licenses must be obtained before launching operations, such as a sales tax license, professional license, or zoning permit.
Additionally, specific industries require additional certifications, such as food service industry certifications or health-related certifications like CLIA certification for clinical labs.
- A Rundown Of Bonding
Bonding is similar to an insurance policy, but it protects against financial loss due to employee dishonesty, theft, or fraud rather than physical injury or damage caused by employees or customers. Depending on the type of industry you operate in, bond amounts may vary significantly but generally fall between 5% and 20% of annual gross revenues.
The bond also assures that contractors will complete projects according to their contract terms; if they fail to do so, then the bond will pay out any losses incurred by their failure to meet contractual obligations according to agreements with their clients.
Conclusion:
As a business, being insured, licensed, and bonded are important components of running a successful operation; understanding how they differ will help ensure that your business remains compliant with all laws and regulations while also providing adequate protection against potential losses due to employee dishonesty or other unforeseen events such as natural disasters.
Be sure to do research specific to your industry so you know which forms of coverage are necessary for your particular situation; doing so will help minimize the risk associated with running a small business while giving you peace of mind knowing that you are adequately protected should anything unexpected occur down the line.
