Managing risk so you sleep well: the case for business insurance

Running a small business involves a significant investment. Business insurance protects your investment by minimizing financial risks associated with unexpected events such as a death of a partner, an injured employee, a lawsuit, or a natural disaster. Unless you are an employer, business insurance is generally not required by law; however, it is common practice to purchase enough insurance to cover your assets. If your business is an LLC or a corporation, your personal assets are protected from business liabilities; however, neither business structure is a substitute for liability insurance, which covers your business from losses.

The State of Minnesota has its own insurance requirements for businesses. Companies with employees must pay for workers' compensation insurance, unemployment insurance, and state disability insurance.

Many small business owners purchase a business package policy called a "BOP," a business owner's policy. A BOP typically includes property insurance, business interruption/continuation insurance and liability insurance. Often it is a less costly option for small businesses than buying a set of individual policies. Many insurers customize BOPs for specific types of businesses.

However, a BOP does not cover professional liability (liability claims arising from wrongful practice by professionals), auto insurance, workers' compensation, health or disability insurance, all of which need to be purchased separately.

Not all businesses qualify for a BOP.  For example, a factory or jewelry store would probably not qualify for a BOP. Those businesses, because of their unique risks, usually require more customized coverage than what's included in a standard BOP.  A home-based business or a company with only a few employees may start out with a BOP and then expand its coverage as it grows.

Finally, your financial lender or investors may require you to maintain life, business interruption, fire, flood or other types of insurance to protect their investments.

Mike Olson, manager of the Grand Rapids State Agency, noted that he and his colleagues provide affordable BOP coverage.  “Our ‘Main Line’ BOP automatically includes coverage for the sometimes formidable costs of defending employers against employee claims of discrimination, wrongful termination or harassment.  Additionally, we can supplement the basic policy with specific coverages designed to meet your business’s special needs.

“The BOP is well-suited for a wide range of Main Street businesses, such as building contractors, apartment owners, condo associations, auto repair shops, restaurants, general and medical offices, retail and service businesses, wholesale businesses and light manufacturers.”

 Sources: Minnesota Department of Commerce; U.S. Small Business Administration


For more information about BOPs, contact Mike Olson, manager of Grand Rapids State Agency, at (218) 326-1122 or



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