Insurance for Services Businesses – Doing without is not worth the risk

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When you start your business, you might want to keep costs down, which could mean skipping on some essential requirements such as insurance. Trust me; it is not worth the heartache and financial ruin that could destroy your business with a single incident. Insurance for services is so much more than public liability coverage. It could mean the difference between a thriving start-up and a company that disappears into history.

So what kind of business are you running? Where will you operate? What services will you provide?

What kind of insurance do you need?

You’ll need to answer the first three questions before determining the last one.

Why is Insurance for Services So Important?

In your day to day life, you might not think about business insurance, especially if you’ve been working for someone else. However, you insure everything else, so you must know that business insurance is necessary. You insure your home and its contents, car, health, and sometimes your life. And aside from the complete destruction of your home, business incidents have the most power to destroy your security and financial stability.

If you need to insure your car against theft and accidents, why wouldn’t you insure your business against the same?

If you got into an accident in your car, you would expect your insurance to pay for the damage – and if the other guy is at fault, they will claim it back for their insurance company. Easy and simple. In both cases, you aren’t significantly out of pocket, whether it’s your fault or not, and whether the other party is insured or not.

But what happens if you have or cause an accident in your business?

Some people are particularly litigious. Suppose someone falls on your premises, breaks a wrist and can’t work as a typist, artist, engineer, etc., for a prolonged time. Who do you think they will blame?

That’s right. It will be you. Even if your security cameras pick them up tripping over their untied shoelaces, it’s a fine line and could be very expensive just to prove you aren’t at fault.

What about the service you provide? Could you cause any damage to property with the equipment you use? Is there a slim chance of an allergic reaction to a product? Even all organic natural products might have an adverse effect on some people.

This is why business insurance for services is so vital.

What Kind of Service Business Do You have?

For the purpose of this article, I’ll split service businesses into three categories:

• External services
• Physical Personal Services
• And Intangible Services

All of these require you to provide a service for individuals, companies, or even items (I include animals here). Moreover, all of them have the potential for property damage, bodily harm, personal injury, etc. The potential for accidents will depend on the category your business falls into. Your business may fall into two or even all three of them.

Where Will You Operate?

If you operate out of your premises, you will be inviting people into a space that you control and maintain. That means anything that happens on those premises could technically be deemed your fault. It seems harsh, but that’s how it works.

Alternatively, you may decide to work on your clients’ premises. In some cases, such as property services, cleaning, and gardening, you don’t have a choice but to work on your clients’ premises. This removes the need to have buildings insurance for your services, but you may still need to insure yourself against property damage and personal and bodily injury.

What services will you provide?

This is where you will need to define where your business falls in terms of different categories and will help you determine the insurance coverage your service business will need.

Physical Personal Services

Physical personal services can include anything that requires you to have physical contact with your clients. Some examples are physical therapy, hair, nail and beauty therapy salons, wellness retreats and spas, sports and fitness training, and even tattooing and piercing. In every personal physical service, there is a risk of injuring a client, whether through negligence, failure to disclose important information or sheer bad luck.

There is another service that I should mention here: medicine and medical adjacent services. However, medicine is very much an industry on its own. While it will need every other kind of insurance that personal physical service requires, it will also need malpractice coverage.

External services

External services include everything from deep cleaning bathrooms and home renovation mess to landscaping a garden or grooming a pet. Effectively, it is a service provided to anything that is not a fellow human being. Unless you have the “thing” transported to your premises for the service, much of the time, these services take place on the clients’ property. Unless the client provides them, you probably have the equipment you need to perform these services.

Intangible Services

Intangible services will usually comprise advisory services, which could be for individuals or companies. Anything that doesn’t have a physical or tangible result could be termed “intangible”. Counselling of any nature that doesn’t get physical, financial planning, accountancy, bookkeeping, legal representation and advice, life coaching, interior design and decorating advice – The list could go on, but we would be here all day. While you may not have private premises, carry and use equipment that can cause personal or property damage, your advice and actions could cause personal injury to a client through poor advice, lack of research,

Sole Trader or Growing Company?

This is an important question because there is one type of business insurance that the small sole trader doesn’t need. However, as soon as that sole trader takes on a subordinate staff member, they will become an employer, and employers need worker compensation insurance.

It’s a little different if they take on a partner, but then we are heading into the realms of incorporating and choosing business registry types – Let’s cover that another time.

What Insurance for Services Will You Need?

The easiest way to determine which insurance coverage your service need is to become the biggest pessimist you can, i.e. believe everything that could possibly go wrong will go wrong.

Many little adages throughout history boil down to “hope for the best, prepare for the worst”. Your insurance coverage is preparing for the worst.

Business Owner’s Policy – start with the basic minimum.

As a brand new business start-up, you might be a sole trader or a small coalition of partners. At this point, you will probably be able to justify an overarching Business Owner’s Policy that will combine the essentials of Commercial Property, Business Liability, and Business Income insurance.

Commercial property insurance will cover damage or loss of premises, but it will also protect business assets, such as equipment, furniture, and documents.

Business liability will help to cover any legal claims made against your business.

Business Income Protection will help mitigate the loss of revenue if the business is unable to operate due to another insured incident. For example, suppose your business must cease operations until a legal claim has been settled or equipment or premises are replaced. In that case, business income insurance will help replace the lost income over that period.

But you might need more than just the basics. When you think about the service you provide, what could go wrong? When you think of everything that might go wrong, you can bet an insurance risk assessor has coverage for it. Below are some other types of insurance your business might need in addition to the basics.

General Liability

Suppose someone trips and falls on your doorstep, you put a ladder through a Bentley’s windshield, or your servers get hacked, and private information is distributed to unauthorised people. In those cases, General liability insurance will help you cover costs associated with claims for medical cover and compensation, property repair or replacement and personal injury compensation.

Professional Liability

What would happen if you made a professional mistake? Did you leave a chemical straightener on too long, the extension you built was wonky, or give someone terrible financial advice? Your mistake could cause significant damage to an individual or even devastate a business. Professional liability will help you cover the costs of claims against your business that assert you made a mistake.

Worker’s Compensation /Employer’s Liability

When your business has reached a point where you employ staff, you will need workers’ compensation cover. It protects both you and them from the extensive costs of work-based injury or sickness. It will help pay medical bills, replace lost wages, and pay for ongoing rehabilitation care. If the worst should happen, it will also cover funeral expenses in cases of death.

In addition to workers’ compensation cover, it is worth investing in disability insurance, particularly in riskier industries where an injury at work could result in permanent disability.

Cyber Insurance or Data Breach

If you hold a significant amount of sensitive information about your clients, this is insurance coverage you might want to add. When people trust you with their data, they can become incandescently angry when that data is accessed by others, mislaid, or stolen. It’s a big thing to lose or leak personal data. While we keep trying to ensure all digital data can be as safe as possible, there are always cracks in the system that the unscrupulous can exploit.

Commercial Auto Coverage

Suppose you or your staff travel to different places to provide your services; whether as a mobile hairstylist, auditor, cleaner or real estate agent, commercial auto coverage is essential. It can be a grey area when it comes to claiming. However, personal auto insurance, especially if you use your private vehicle, will likely not pay a claim if they discover the incident happened while travelling for business.

Extended Property Coverage

While a basic business owner’s policy might cover your premises for damage caused by someone or something else, it probably won’t cover natural causes. If you are in an area of high earthquake occurrence, have frequent floods or tornados, or coastal storms, you should consider extending your commercial property coverage.

Be Well-Informed and Strategic

While some or all of these insurance options may be useful to your business, it would help if you worked with an insurance company or agent to find the best option. You don’t want to get stung by the first company that offers you everything at one massive premium. It might seem the most straightforward, but it won’t be cost-effective.

Find an independent insurance advisor who can help you determine the best coverage for the best price. Sure they will probably earn a commission, but it’s in their best interests to get you the best you can get and that you can afford.

Don’t Risk It!

Businesses need business insurance, especially when services are involved. The first mishap will completely obliterate whatever money you might save upfront by not investing in insurance coverage. It is not worth the risk. If you haven’t factored your insurance needs into your business plan, you are missing something.

“It’s better have it and not need it, than need it and not have it.”

Trite but true. In the long term, if you never need your insurance to payout, you will get cheaper payments through not claiming.

By all means, shop around for the best possible deal. Take on a little extra on your deductible to get a cheaper premium. Start with only the basic Business Owner’s Policy to cover your initial start-up. However, don’t let saving money leave you open to the devastation of losing everything you have worked for.

No one can predict the future, but you can prepare for possibilities.