A part-time business is a small business that doesn’t require the traditional 40-hour work week. Doing a business part time is a sensible option for many entrepreneurs who want to start a business, but want to lower the risk by keeping another job. Regardless of the reasoning, starting up a small business is an exciting time in anyone’s career. It is a great way to use your skill set to work for yourself and own your own business; in fact, there are nearly 25.7 million businesses with no employees, which is a good indication of just how rewarding owning a small business can be.
The road to success isn't without its challenges, though. There are risks to owning and running a business that you need to be aware of. Happily, there are also inexpensive ways to cover those risks so that your part-time business remains profitable.
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With that in mind, here are five things you need to know about part-time business insurance:
1) Just because your business is part-time doesn't mean there isn't risk.
When we talk to part-time business owners about their products and services, usually the first thing we hear is, "This is just a part-time business. There isn't really any risk."
While we understand what these business owners are saying, we challenge them to view their business differently.
Being a part-time business owner doesn't mean that you don't have any risk; it just means that you have less. After all, businesses with a larger scale generally are exposed to more risk because of the volume of business they transact.
An example of this would be an artisan soap maker that crafts the soap in their house and sells it directly through their website. Although they probably won't suffer as many lawsuits as a large soap brand, their product could still harm a customer. There are just fewer customers to potentially launch a lawsuit.
2) There are more options than ever when choosing a part-time business insurance company.
The increase in streamlined quoting systems and digital underwriting means there has never been a better time to purchase part-time business insurance.
In the past, traditional commercial insurance companies had high minimum premiums to help support their underwriting operations. This translated to hiring people to review applications, price the insurance policy, put together the final documents, process policy changes, and handle numerous other tasks. As a result, the expenses of writing a small business insurance policy were very high. Today, though, small business insurers have realized that by leveraging technology, they can offer small business insurance at a much lower cost.
Insurers such as Hiscox, Chubb, Liberty Mutual, Travelers, and Coterie—to name a few—are offering technology as a solution lowering the cost of small business insurance. Automated underwriting is paving a path to cheaper premiums for small businesses.
3) Just incorporating your business isn't enough to protect your personal assets; insurance is a necessary layer of protection.
Many small business owners believe they could call it a day and walk away unscathed if they ever face a lawsuit.
While an LLC or a corporation does provide some layer of separation between the business and its owner, there is still a risk that you could be on the hook personally for any legal liabilities arising from the corporation's actions.
When an owner of a company becomes individually liable for the company's actions, it’s called "piercing the corporate veil." It happens all the time. The protections of a corporation can fail to protect you due to multiple mistakes, whether through using improper corporate procedures or even spending any company money on personal things. Essentially, piercing the corporate veil happens when the lines are blurred between the company and your personal life. These mistakes are hard to avoid unless you have the expertise of both an attorney and an accountant.
Having an insurance policy means that the claim can still get paid out up to the policy limit, even if the corporate veil is broken.
4) Basic insurance for a part-time business is the same as a full-time business. It just costs less.
It is very common to think that you, as a part-time business owner, will be purchasing very different types of insurance than your larger corporate competitors.
While this is true for niche policies such as directors and officers liability or fiduciary liability, in general, all companies purchase similar general liability and property insurance policies. A larger company would just have larger limits and be more expensive than a part-time company.
In fact, many small companies have more coverages automatically included on their insurance than their larger competitors. Since part-time businesses require less underwriting and are exposed to less risk, insurance companies will often throw in extra coverages to differentiate themselves.
5) Your homeowners insurance and personal auto insurance might exclude certain business activities. You should ask your agent what is covered.
As a part-time business owner, you should know the boundaries of your home (if your business is home-based) and personal auto insurance policies.
If your personal insurance does not include certain business property or does not permit certain business operations, you will need to find an insurance company that will cover it. You may also have to move your coverage to a commercial policy.
Additionally, if you need to issue any certificates of insurance to a vendor or customer, you will need a commercial insurance policy to comply with their requirements. The only exception we have seen is the "hazard insurance" requirement on the popular SBA loan.
Whether you need insurance to comply with a contractual requirement, or you are just looking to cover your risks, let us know! Many types of businesses can get an instant online quote.
We have a panel of carriers that specialize in small businesses and even home-based businesses. We can help you get the quote, answer any questions you might have in the process, and issue your certificates, so you can get back to growing your company.