Theft of a young woman in a supermarket

By Ryan Hanley

Insurance is critical for any small business owner. It can protect against certain types of accidents and events that could otherwise threaten to destroy everything you’ve worked so hard to build.

According to Forbes, 36 to 53 percent of small businesses become involved in at least one litigation in a year, and 90 percent of all businesses are involved in litigation at some point. Being sued and going through the legal system can be very costly for small businesses. To protect your own business, you may need to invest in more than the basic business insurance.

Different businesses need varying types of insurance. If your employees drive company vehicles, you would need small business car insurance and coverage. If you run a simple retail store but you live in an area susceptible to earthquakes, you’d need insurance in case one strikes.

These are just a few scenarios a business owner might encounter. The following are common cases that you might come across in your small business that wouldn’t be covered by basic insurance.

A Mechanical Breakdown Occurs

Standard business property insurance won’t cover mechanical breakdowns. If this happened at a restaurant, the owner would be out thousands of dollars because of spoiled food. Or, if employees were working on a factory line, production would have to be shut down. Owners would still have to cover wages and, in addition, pay to fix the equipment and get back on track.

To avoid this situation, you would have to buy additional coverage for these types of incidents if they’re not outlined in the current policies. Also, you should clean and test your equipment regularly to make sure it’s functioning properly. You can provide employees with daily checklists for taking care of the equipment to keep it going. By putting preventative measures in place, you can steer clear of financial losses down the line.

Employees Steal From You

According to Statista, in 2014, the median loss due to employee theft in the United States was $256,858 for companies with under 151 people. Though you might think your small business insurance is going to cover you for thousands of dollars worth of theft, chances are, it’ll only protect you for a loss totaling a few hundred dollars. A separate insurance policy may be required in order to cover a large amount of theft.

If you’re a small business owner, you should always conduct background and criminal checks on applicants, as well as contact their references to make sure they’re legitimate and trustworthy. You might want to install cameras that only record video to protect against theft. Only employees who have been with the company for a while and proven they are honest should have access to password-protected systems, the incoming and outgoing mail, and financial documents.

Clients Get Hurt or Experience Loss

You and your employees are only human. Sometimes, mistakes happen. These mistakes can end up costing your small business hundreds of thousands of dollars.

Every small business insurance program needs general liability coverage. Let’s say a customer walks into your business and a piece of wood falls on her head, causing her to go to the hospital. She decides to sue your business for her medical expenses as well as money she lost from her job by being in the hospital. Your insurance would cover that, as well as any expenses that need to be paid to defend you.

Liability insurance is only for accidents, and it won’t cover you if you do subpar work. Let’s say your company installs air conditioners in homes. If one of your employees doesn’t install a system correctly, the client could potentially sue you if his house isn’t getting cold and you’re refusing to send out another employee. However, if something caught on fire and the house burned down because the AC system wasn’t installed properly, you would be covered. The insurance would pay for the damages to the property.

Before buying any insurance policy, you have to look at every possible situation that could arise with your small business. Choose coverage that will be fitting for your needs, and take safety measures for prevention purposes.

You’ve fought to get to where you are, and you need to ensure that you can stay there, even if bad things happen.

Ryan Hanley is the Vice President of Marketing at and the Managing Editor of Agency Nation. He is also a speaker, podcaster and author of the Amazon best-seller, “Content Warfare.” Ryan has over 12 years of insurance expertise and blogs frequently to help consumers understand complicated insurance topics.