Small businesses without insurance or under-insured

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Photo credit: Ketut Subiyanto

In the United States, there are close to 31 million small businesses. The impact this has on America’s economy is undeniable. It is estimated that close to 50% of American employees are employed by companies that employ less than 500 workers. That number is growing, as companies are turning to E-Commerce and engineering ways to allow employees to work remotely. By reducing the number of employees and customers that come to their physical location, they reduce risks. Ideally, this would make their need for and cost of liability insurance less.

Small businesses compliance

Small business owners are expected to follow the same laws like any other company. Laws regarding discrimination, sexual harassment, interview questions, wrongful termination, and FMLA are required in most states for all businesses. Failure to follow the laws opens small business owners up for legal action, fines, and judgments. These laws are well-known and employees can easily report companies that do not comply. Employees have the right to feel safe at work. Business owners usually take this very seriously. Having proper coverage is ethically correct. From a business standpoint, it is the smart thing to do. One lawsuit due to a person being injured, killed, on your business property, can put a small business out of business.

Required commercial insurance coverage

Accidents happen in all industries. When an employee is injured or becomes ill due to unsafe conditions at work, they should expect their financial losses to be covered by Worker’s Compensation insurance. Many employees are shocked to find that their company does not carry this essential insurance policy. As a matter of fact,  COO Sofya Pogreb of Next Insurance reports, up to 40% of small businesses do not carry insurance policies that are required by law. Further, 26% of small businesses have no worker’s compensation insurance. Just one serious accident in these businesses exposes the business owners’ poor judgment.

Industry change

In years past business owners would use their local insurance provider and request a quote for their business. The insurance quote you were likely to receive would include:

  • Workers Compensation
  • General Liability 
  • Professional Liability
  • Insurance on any company-owned (commercial) vehicles
  • Contractors insurance
  • Construction insurance
  • Commercial tools coverage

Today, E-Commerce makes it easy to get your quote, buy your policy, file claims, and get customer service online. You can work with your preferred company to customize a policy that fits your needs. Buying only the coverage you need lets you determine your costs.

What tomorrow brings

By now we hope you can see that insurance is vitally important. As stated, employee protection is the law. In our modern age, legal action is almost the norm when something unexpected happens. In the very near future, you will see more small business owners turn to digital insurance. The same thing that draws other industries to the internet is attracting insurance carriers. Benefits of purchasing insurance online include:

  • The ease of doing business via the internet
  • Efficiency and time-management, 
  • Access 24-hours per day and 7-days per week
  • Immediate customer service
  • Lower overhead ( an lower costs)

Online businesses need coverage

When the pandemic began, many small businesses were forced to shut their doors. While they hope to re-open in the coming months, business owners were faced with the problem of making a living until that happens. As mentioned above, many put everything they had into their internet marketing. This could make small business owners believe they do not need commercial insurance, but they are mistaken.

Assume for a moment that you sell widgets. You purchase the widgets from a manufacturer who drop-ships them to your customers when you place your order. You collect the payment, place the order with the vendor, and record your sales electronically. Your hands never touch the product. 

Now assume that something goes wrong and the customer is seriously injured or dies due to the malfunction of that widget. In the United States, the customer can sue the manufacturer for damages. As the distributor, they can also sue you as well assuming you knew or should have known the danger of the product you sold  If the court agrees, you could be put out of business. You will likely face fines and penalties for not having insurance coverage. At the very least you should have commercial liability insurance.


Insurance coverage is required in most states by law. Accidents happen. Sometimes they happen at the office and workmen’s compensation is needed to provide for your employee until recovery is complete. Whether your business is housed in brick and mortar or electronically, you must prepare for any situation. 

It is wise to seek a quality insurance company that is an expert in commercial coverage. Once you find a company that you are comfortable with them, you can get the right coverage. Work diligently with the agent making sure he understands you want a custom-designed policy that fits your needs and your budget. 

You will be more secure than ever before knowing you are taking care of the people you do business with. You will no longer have to worry about the state finding out that you are not providing coverage. 

No matter how you look at it, insurance is part of the foundation of your company and it is necessary if you are going to thrive.