How to Insure Your Business: The Protection Checklist for Owners

Insuring a business means covering two kinds of risk. The first is what can happen to the business: a lawsuit, a fire, an employee injury, a data breach. The second is what can happen to the people the business depends on: an owner or key employee who dies or becomes disabled. Property and casualty (P&C) insurance handles the first kind, and that’s a job for a commercial P&C agent. Life and disability insurance handle the second.

To be upfront: United Eagles Financial is an independent life insurance agency. We place life insurance. We don’t sell liability, property, workers’ comp, auto or cyber coverage, so talk to a licensed commercial P&C agent about those. Below is a plain-English overview so you know what to ask, followed by the people side, where we can help directly.

Part 1: The business coverages (talk to a commercial P&C agent)

Coverage	What it generally protects	Who usually looks at it
General liability	Claims that your business caused bodily injury or property damage to someone else, plus legal defense and settlements	Almost every business
Commercial property	Your building, equipment and inventory against events like fire, storms and vandalism	Businesses with significant physical assets
Business interruption (business income)	Lost income and ongoing expenses while you can’t operate after a covered loss	Anyone who couldn’t run after a fire or storm, often added to a property policy
Business owner’s policy (BOP)	A bundle of typical small-business coverages in one policy	Many small and home-based businesses
Workers’ compensation	Employees’ work-related injuries and illnesses	Employers. State law sets who must carry it
Commercial auto	Vehicles owned or used for the business	Businesses that drive for work
Professional liability (E&O)	Claims of errors, negligence or malpractice in your services	Consultants, advisors, contractors, health professionals
Cyber	Breach response costs and claims from others after a data breach	Any business that holds customer data or takes payments
Product liability	Injuries caused by a defective product	Businesses that make, distribute or sell products

A few notes worth knowing before you call:

Workers’ comp is set by state law. Workers’ compensation for private-sector employees is handled by each state. In Michigan, for example, private employers must carry it if they regularly employ three or more people at one time (part-time counts), or one or more people working 35 or more hours a week for 13 weeks or longer in the preceding 52 weeks. Michigan treats partners, corporate officers and LLC managing members as employees, but a sole proprietor working in their own business is never an employee of that business. If you’re outside Michigan, check your own state’s rules.

Cyber coverage comes in two parts. The FTC describes first-party coverage, for your own costs after a breach (notifying customers, recovering data, lost income, forensics), and third-party coverage, for claims others bring against you. Ask which ones a policy includes and whether it has a “duty to defend.”

Read the business interruption terms. Ask what triggers the coverage, how long the waiting period is before it pays, and how long it pays.

Ask about vehicles. If a car or truck is used for the business, ask your agent whether your current auto policy covers that use.

Part 2: The people risks (this is where we help)

A business can be fully covered for fire and lawsuits and still be one death away from closing. These are the protections owners most often miss:

1. Your own personal life insurance

Your family relies on your income, and business debts often follow you personally. SBA loans, for example, require anyone who owns 20% or more of the business to personally guarantee the loan. Personal coverage replaces your income and clears debts so your family isn’t forced to sell the business in a hurry. Start with how much life insurance you need.

2. Key person coverage

If the business depends on you or one employee, a policy owned by the business gives it cash to recover. Get the IRS notice-and-consent paperwork right first. See our key person life insurance guide.

3. Buy-sell funding

If you have partners, a buy-sell agreement decides who buys a deceased owner’s share and at what price. Life insurance provides the cash. See buy-sell agreement life insurance and life insurance for business partners.

4. Loan and SBA requirements

Lenders often require life insurance assigned to them, especially on SBA loans that aren’t fully secured and depend on one owner. See SBA loan life insurance requirements.

5. Disability coverage

SSA says studies show that a 20-year-old worker has a 1-in-4 chance of becoming disabled before reaching full retirement age. An owner who can’t work for a year can sink a business as surely as one who dies. Individual disability income, key person disability and business overhead expense policies are built for that risk. We focus on life insurance, so ask a disability specialist about these. They’re important.

The protection checklist

✓	Coverage	Who handles it
☐	General liability or a BOP	Commercial P&C agent
☐	Property and business interruption	Commercial P&C agent
☐	Workers’ compensation, if your state requires it	Commercial P&C agent
☐	Commercial auto	Commercial P&C agent
☐	Professional liability / E&O	Commercial P&C agent
☐	Cyber	Commercial P&C agent
☐	Owner’s personal life insurance	United Eagles Financial
☐	Key person life insurance	United Eagles Financial + your CPA
☐	Buy-sell funding	United Eagles Financial + your attorney and CPA
☐	Loan or SBA-required life insurance	United Eagles Financial + your lender
☐	Disability income coverage	A disability insurance specialist
☐	Annual review of everything above	You, once a year

Frequently asked questions

What insurance does a small business legally need?

It depends on your state, your industry and whether you have employees. Workers’ compensation is the big one, and state law sets it. In Michigan, coverage is required once you meet the employee thresholds above. Some states require other coverages too. Lenders, landlords and clients can also require insurance in their contracts, so read those.

Does my business insurance pay anything if I die?

Generally not to your family. Liability and property policies protect the business’s assets and its legal exposure. They don’t replace your income or buy out your share. That’s what personal life insurance, key person coverage and buy-sell funding are for.

What is a business owner’s policy (BOP)?

It’s a package that combines typical small-business coverages, often general liability and property, into one policy. The SBA suggests it for many small business owners, including home-based businesses. A commercial P&C agent can tell you what a given BOP includes and leaves out.

Should my business own my life insurance, or should I?

It depends on the job the policy does. Coverage for your family is usually owned personally or by a trust. Key person coverage is owned by the business. Buy-sell policies are owned according to how the agreement is structured. Many owners need more than one policy, and your CPA and attorney should weigh in on ownership.

If I have life insurance, do I still need disability insurance?

They cover different risks. Life insurance pays if you die, and disability insurance replaces income if you’re alive but can’t work. Given SSA’s 1-in-4 figure for young workers, most owners should look at both.

Start with the part only you can protect

Your P&C agent protects the building. We help protect the people. We’ll review your personal, key person, buy-sell and loan coverage needs and compare options across many carriers. Get a quote or call 586-343-1505. You can also read more about life insurance for business owners.

This article is general education. United Eagles Financial is a life insurance agency and does not sell or advise on property and casualty coverage; coverage terms vary by policy and state.

Sources: SBA, Get business insurance; U.S. Department of Labor, Workers’ Compensation; Michigan Workers’ Disability Compensation Agency, Insurance Requirements; FTC, Cyber Insurance; Social Security Administration, Understanding Social Security Disability Benefits; SBA SOP 50 10 8.1, Section A, Ch. 5, Para. A (Guaranties).