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What Does Self-Employed Business Insurance Cover in Massachusetts?
If you are planning to start a new business, it can be an exciting time. Being self-employed brings numerous advantages over having a regular job and an employer who dictates everything you do. Self-employment brings the possibility of earning as much money as your business is worth, rather than being restricted to a set wage or salary.
Self-employment also means a lot of planning and a level of risk that didn’t exist when you were in a regular job. One of these risks is what happens when things go wrong. An employee has an accident or gets sick at work. There is a fire and your business premises or infrastructure is damaged or destroyed. A customer slips over and has a spinal injury because of something slippery on the floor of your display room, workshop or office. The list goes on and on.
While there is only one type of insurance that is actually compulsory in Massachusetts, workers’ compensation insurance, there is a suite of options in commercial or business insurance which every sensible new business considers. Without workers’ compensation insurance, you face having your business shut down, or at least, a fine, but without well chosen options of business insurance, you could face financial ruin or years of debt.
Workers’ compensation insurance – a must to protect your business as well as your employees
All employers in Massachusetts, even those with a single, regular, part time worker, must take out workers’ compensation insurance. If you do not employ anyone at all, then you do not need to have this type of insurance just for yourself. Your own medical insurance covers you if you have an injury or illness at your own workplace. Workers’ compensation insurance is there to cover your liability for your workers’ injuries or sickness if they have an accident or become sick at work. It protects your business from a potentially more costly personal injury claim and restricts compensation in most cases, if awarded, to a percentage of lost wages and full medical costs, but little more than that.
General liability insurance
One important option in business insurance is cover for your liability to anyone who legitimately uses your business premises and has an injury. This person could feasibly sue you if it is believed that their injury was caused by your own negligence. For example, let’s say that you have opened a new coffee shop. A customer is badly burned by a jet of steam from your barista machine, which is subsequently shown to be defective. Your business is liable for this accident, but compensation can be paid from your liability cover, not from your own business’s bank account. Your general business liability insurance would pay for the costs of any medical treatment, lost earnings and potentially other damages claimed like a pain and suffering component.
Take another example; say you become a self-employed tree surgeon, dealing with diseased trees and their general health on other people’s property. You are found responsible for a tree falling on your client’s roof, causing several tens of thousands of dollars in damage. Your general liability insurance cover should protect your business assets from being used to pay compensation for the damage.
Business auto insurance
One other type of business insurance options that partly comes under the liability umbrella is business auto insurance. This protects you from being sued if a vehicle your business uses injures someone or damages their property and the affected person can prove that it was not their fault.
Business auto insurance options also include the cost of damage to your own vehicle if it is damaged by another vehicle, while uninsured and underinsured cover protects against accidents caused by uninsured or underinsured motorists.
Business property insurance
One of the most components of any self-employed business person’s insurance cover is protection for damage to your business premises and any machinery, equipment or other assets which are an established and necessary part of your business. If you have a fire, or a winter storm damages you’re the roof of your business premises, or an electrical fault leads to expensive repairs to your business’s electrical and / or electronic equipment, property insurance provides the necessary cover.
Property insurance will also provide cover losses due to theft and the effects of crime on your business (depending on whether the losses are higher than your deductibles).
Things that affect the cost of small business insurance cover
As with any types of insurance cover there is a range of factors that affect the cost of a policy or policies.
As a new business, your premiums are likely to be higher than for a well established business as you present a greater risk. Your assessed level of skills as a self-employed business person, which include not just your business skills but your skills in whatever you are providing, selling, making or repairing, will also affect your premiums.
Any previous claims you have made, as a business, or possibly even as a private individual, may affect the premium. The lowest premium will always be offered to those with no history of previous claims. Not that this should also influence your own business practices. Good safety management if you have opened a café, restaurant or bar will mean fewer accidents and therefore claims. Sloppy management will mean more accidents and your liability insurance premium will inevitably rise.
The deductibles you choose to opt for will also affect the cost of cover. As with any other type of insurance, the higher your deductibles, generally the lower your premium. The area where your business is located in the state will also affect your premiums. Some locations are judged, for whatever the reason (e.g. higher crime rate), to be higher risk than others, even if all other factors are exactly the same.
While starting a new business and becoming self-employed for the first time can be an exhilarating experience for many, it does involve a lot of thought. Insurance is a must to protect you and your new business as well as your employees, if you have any, customers, clients and others who are affected by your business. The options for business insurance can seem confusing as there are so many of them. It’s worth taking your time to decide what is best for your business and if you need advice, make sure you get it before you make poor choices.