Are you too busy serving your customers and growing your business to get caught up in the finer points of administrative concerns? Understandably, topics such as insurance get lost in the shuffle of doing business, but this can backfire spectacularly because it leaves your investment in your business unprotected.
Sometimes the options feel overwhelming and difficult to decipher. This guide will break down the essential policies every retail startup needs to consider, with practical advice you can act on immediately.
Essential Takeaways:
- General liability insurance policies are useful for claims arising from customer injuries and property damage.
- Property insurance can help to protect a business’s inventory and equipment, along with its physical space.
- Workers’ compensation coverage is a legal requirement in most states once you have hired employees.
- Business interruption coverage can replace lost income when disasters force a temporary closure.
- Cyber liability insurance can address data breach risks stemming from payment processing.
What General Liability Insurance Covers for Your Store
General liability insurance protects your business if customers are injured while on your property; it also applies if you accidentally cause damage to another party’s property. So whether a customer slips on your store’s wet floor or your employee accidentally breaks a client’s watch while showing them a display case, you’ll be covered.
Most policies will provide $1 million for each occurrence, with $2 million in aggregate coverage. That might sound excessive until you consider the fact that the average slip-and-fall claim costs around $20,000. Just a single serious incident could be enough to wipe out a new business without proper coverage.
Why Property Insurance Matters More Than You Think
Property insurance covers the investments you have made in your merchandise, furniture, equipment, and sometimes even the building itself if you own it. It offers you protection from everything from fire and theft to vandalism and certain natural disasters.
Keep in mind, however, that basic property policies often exclude flood damage and earthquakes, so you will need separate riders for those perils. This is particularly valuable if your shop is situated in a flood or earthquake zone. The expense might feel unnecessary right now, but you’ll change your mind pretty quickly when water starts seeping under your front door.
When it comes to this type of insurance, you need to determine whether you want to obtain actual cash value or what is known as “replacement cost coverage”. Actual cash value policies factor in depreciation, and this means you’ll receive less money for older items. Although replacement cost coverage costs more up front, it pays to replace items at their current prices. For a retail startup with new inventory and equipment, replacement cost is generally the better choice.
When You Need Workers’ Compensation Insurance
Workers’ compensation is legally required in most states once you have hired your first employee, but you should check your state’s specific requirements to be certain. This coverage pays for medical costs and lost wages if an employee is injured while performing their job, and it also protects you from lawsuits stemming from workplace injuries. The cost of this insurance varies by state and industry, but retail generally falls on the lower end of the risk spectrum compared to industries such as construction or manufacturing.
Some states allow sole proprietors to opt out of workers’ comp coverage, but it’s worth considering anyway. After all, if you are lifting heavy boxes all day or standing for 10-hour shifts, an injury could sideline your business without coverage for your own medical bills and lost income.
How Business Interruption Insurance Keeps You Afloat
Business interruption insurance policies may replace lost income when your store has to close temporarily due to a covered event, such as a fire that damages your store. It can cover your lost profits while you’re rebuilding, as well as ongoing expenses such as rent and payroll.
You will usually find this type of coverage as an add-on to your property insurance policy rather than a standalone product. It will take effect after property insurance covers the physical damage and can help with the financial fallout during the time it takes to repair or rebuild your space and return to normal operations.
Protecting Customer Data With Cyber Liability Coverage
Every retailer that processes customers’ credit cards is vulnerable to cyber risks. Small businesses are affected by data breaches more often than you might expect. Cyber liability insurance covers several costs associated with data breaches, including notification requirements, credit monitoring services for affected customers, legal fees, and potential fines.
Work With JMG Insurance Agency for Personalized Coverage
At John M. Glover Insurance Agency, we work with small retail businesses such as yours. We understand that cookie-cutter insurance packages don’t work well for entrepreneurs building something from scratch, so we will review your actual risks and build a policy that makes sense for your budget and business model. Contact us today for a free consultation and a customized quote for your retail business.
