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Insurance for entrepreneurs: 9 key coverage considerations

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7 mins

If you’re an entrepreneur, the chances are good that you’re a risk-taker by nature. You’re an idea person, a person with a vision and a plan of action to meet a need or fill a gap.

Though you’re comfortable with taking risks that you feel you can control, you’re also faced with external financial risks that you have little control over. This article will help identify those key risks for you and give you a plan of action that will prevent them from crippling your finances and delaying your dream.

It’s a given that when you’re buying a home, you must have homeowner’s insurance, or you can’t close on that home. Similarly, it’s required by law that you carry automobile insurance if you’re driving a car on public roadways. These are must-have coverages for the average individual.

As an entrepreneur, in addition to homeowners and auto insurance, you have other must-have coverages that you need to consider. They include:

Let’s look at each.

1. Property insurance for entrepreneurs

You might be flying solo right now and working from home or have an office where you conduct meetings and work. Either way, you have a business property that needs to be insured.

The odds are good that your laptop or desktop computer is your lifeline (besides your phone). It’s a critical piece of business equipment and essential to your success.

Fires and floods have consumed many electronic components that entrepreneurs had built their businesses with. Because of a natural disaster, irreplaceable data was lost forever since computers and backups were destroyed. Or they were both stolen from the same place at the same time.

Tip: keep external data storage devices in a separate location so one disaster or theft doesn’t destroy all of your data.

2. Business interruption insurance for entrepreneurs

Now that you have your property insured against a disaster, what about your income? If your office or home is flooded and your equipment, documents, furniture, etc., are destroyed or damaged, you’ll likely be closed for business awhile because you can’t continue working in your facility.

Having your laptop replaced after a fire is one thing; keeping money coming in so you have a business to return to is another. Business interruption insurance can help by paying installment loans, payroll, professional services you need each month, and much more.

3. Cyber insurance for entrepreneurs

Malware, data loss, and cyberattacks are genuine threats to an entrepreneur. If you’re conducting any business online, you must have cyber insurance. You’ll want coverage that covers credit card processing and accepting digital payments, as well as the storage of personal information and client data.

4. Identity theft insurance for entrepreneurs

This is an inexpensive type of insurance that is often overlooked. For about $50-$60 per year, you can be covered for...

  • Loss of income
  • Notary fees
  • Certified mailing fees
  • Public records searches
  • Monitoring chat rooms and black market websites for information
  • And more

Identity theft policies typically don’t pay for direct monetary losses, like money stolen from your bank account or your credit card being used by an unscrupulous fraudster.

5. Health insurance for entrepreneurs

The last thing any entrepreneur wants is to have their future de-railed because of ruinous medical bills. Health insurance isn’t inexpensive, especially if you have family coverage, but it pales in comparison to the cost of major surgery and a week’s stay in the hospital.

If you’re trying to dedicate every dollar you have to your enterprise, you might want to consider a high-deductible health plan (HDHP)with some supplemental coverage. An HDHP will protect you against a colossal medical bill, and a supplemental policy, like a critical illness plan, can help cover a portion of your deductible if your medical bills are the result of a major illness, like cancer, heart attack, stroke, coma, etc.

Need supplemental coverage? Get a critical illness quote here!

6. Long-term disability insurance for entrepreneurs

If you need your health insurance because you suffered a serious illness or accident, there’s the distinct possibility that you won’t be able to work for a while, meaning your income will come to a grinding halt.

According to the Council for Disability Awareness, the average duration of a long-term disability claim is nearly three years 34.6 months. Many entrepreneurs have invested their life savings in their dream and don’t have the cash reserves to live off if they couldn’t generate an income. Risking bankruptcy because of a long-term disability isn’t a risk worth taking.

A long-term disability insurance policy’s average annual cost is 1% to 3% of your income. It’s a small investment to remain financially healthy while you’re ill or convalescing.

7. Life Insurance for entrepreneurs

If you have anyone in your life that depends on you financially, you must have life insurance. Not for you — for them.

Your long-term disability policy will replace your lost income while you’re living, but how will your income be replaced if you pass away? Most families in America are dual-income families; the loss of one of those incomes to the surviving family members would be devasting for them financially.

Depending upon your age and health history, term life insurance is an inexpensive way to protect your loved ones if you die before your ship comes in. Once it arrives, you can just let your term insurance expire or convert it into the type of life insurance that not only provides a death benefit but also accumulates cash value that you can withdraw or borrow if you need to.

8. Umbrella insurance for entrepreneurs

When it comes to liability, purchasing umbrella insurance is that little bit of extra effort an entrepreneur needs to make to bolster the limited type of personal liability coverage their homeowners and auto policies provide.

The average annual cost of adding $1 million of umbrella insurance costs less than one ticket to see your favorite singer in concert. Of course, buying umbrella insurance isn’t nearly as much fun, but it will give you much more peace of mind.

9. Professional liability insurance for entrepreneurs

Everyone makes mistakes, but entrepreneurs who are releasing a new product or will be providing a unique service are exposed to greater risk. If that product injures someone or causes illness or death, an entrepreneur can lose everything. An error or omission made on a contract, copyright, or product brochure can also quickly empty a bank account.

Having this professional liability insurance — also known as errors and omissions insurance — is critical. It's also more affordable than you might expect.

The bottom line

As an entrepreneur, you have a lot at stake, personally and financially. You may be building your business part-time or have left the corporate world to pursue something more grandiose. No matter how you got started, be sure to invest some of your capital in the insurances we just looked at. You’ll have more of a laser focus on your enterprise from not thinking or worrying about the financial risks you’re facing every day.

Having grown up in upstate New York, Bob Phillips spent over 15 years in the financial services world and has been making freelance writing contributions to blogs and websites since 2007. He resides in North Texas with his wife and Doberman puppy.

The information and content provided herein is for educational purposes only, and should not be considered legal, tax, investment, or financial advice, recommendation, or endorsement. Breeze does not guarantee the accuracy, completeness, reliability or usefulness of any testimonials, opinions, advice, product or service offers, or other information provided here by third parties. Individuals are encouraged to seek advice from their own tax or legal counsel.

— Published October 19, 2021
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