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All small
businesses confront some level of risk in the course of operation. The impact
of those risks (such as accidents causing bodily injury or unexpected lawsuits
brought by third parties), can be substantial, and could result in large
unforseen costs. Fortunately, small businesses are able to mitigate such risks
in a variety of ways through documents like waivers, disclosures, and
independent contractor agreements. However, one of the most powerful ways a
small business can minimize the negative impact of unexpected events is by
having business insurance.[1]
Though a powerful
mechanism for risk mitigation, navigating insurance coverage and options can be
confusing and overwhelming. How do you know what insurance will best protect
you and your business? Before diving into insurance options, and reviewing
the following chart, begin by considering what risks your business might face.[2] With those
risks in mind (and the advice of a licensed insurance broker), small business
owners are equipped with the tools to purchase the right policy—or combination
of policies—to mitigate the most pressing risks.[3]
This blog post
aims to make the task of locating relevant insurance coverage more manageable
by providing a high-level overview of business insurance options available in
Michigan.[4] The
following chart is divided into three categories. First, Liability Coverage options. These policies provide coverage that
protects you against claims by third parties (not yourself or someone who works for you (e.g., an employee or
independent contractor), rather ‘third party’ refers to anyone outside of your
business). Second, Property Coverage
options. These policies cover your business property, and coverage includes
replacement/repair for damage to your business property. Third, Bundle Options. These policies are
examples of common ways that insurance providers package multiple forms of
coverage into one policy for small business owners.[5]
The first column
identifies the type of policy available. The second column describes the general form of coverage provided by
said policy (emphasis on general
because there can be important differences in coverage between different
providers). Finally, column three provides an example of how the coverage that
policy provides applies to specific situations.
The descriptions
of policies included here are by no means exhaustive, and there are additional
aspects to each. In many instances, coverage may be even more expansive than is
indicated in these brief overviews. If you choose to purchase insurance, we highly recommend reaching out to an
insurance broker(s) and shopping around for the right policy. Upon identifying
specific options, a broker will be able to provide concrete answers regarding
when and how the coverage applies to risks faced by your business.
[1] https://www.investopedia.com/articles/personal-finance/072315/top-ways-manage-business-risks.asp
[4] Small business insurance providers are
abundant in the state of Michigan. The information in the following chart is
drawn from a variety of neutral sources which discuss small business insurance
(such as the Small Business Association) as well as directly from various
insurance providers (such as Hiscox, The Hartford, Thimble, Progressive, etc.).
[5] Please
note that the Clinic has no direct experience with these specific insurance
policies or providers and the Clinic does not endorse any policy, plan, or
provider mentioned in this memo.