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Home Business Insurance and Benefits

There is much legitimate trepidation associated with leaving a steady career to pursue business ownership. Beyond parting with consistent wages, an entrepreneur also often relinquishes employer-funded insurance benefits. There are, however, alternative approaches to benefits.

For example, one option, now that you are the employer, is to take advantage of this newfound status. IRS Code Section 105 regarding reimbursement of medical expenses allows a self-employed individual to deduct 100% of their family’s health insurance premiums and out-of-pocket medical, vision, and dental expenses.

So while it is undoubtedly difficult to leave behind previous employee benefits, remember that employers have benefits too! These perks are simply not as widely publicized, and in many cases require a significant amount of research and due diligence to uncover.



Home Business Insurance

According to CaronBeesley of Business.gov:

"Protecting your business investment with insurance is a critical part of small business ownership. It minimizes the risks associated with unexpected events, liabilities, and losses.

However, as with all insurance markets, knowing and finding the best insurance for your needs is not an easy task.

Whether you are starting a business, taking on employees for the first time, or evolving your business structure, there are many variables that determine the right insurance for your small business, including your business structure, business activities, location, whether or not you hire employees, and so on.

Most of the information published in the public domain comes directly from those with the greatest amount of vested interest - the insurance companies and their agents. So it’s no surprise that navigating the maze of small business insurance laws and best practices can be confusing.

There are two fundamental types of insurance - commercial business insurance, which is not necessarily required by law, and employer insurance, which is."

Types of Commercial Business Insurance

  • General Liability Insurance - This insurance broadly covers and provides protection against the legal hassles associated with accidents, injuries and claims of negligence.
  • Product Liability Insurance - If you manufacture, wholesale, distribute and retail a product, this insurance protects against financial loss as a result of a product defect that can cause injury.
  • Professional Liability Insurance - If you provide a service to a customer, this insurance can protect against malpractice, errors, and negligence in the provision of those services to your customers. Some state governments require certain professions (e.g. physicians) to carry such a policy. Check your individual state requirements here.
  • Commercial Property Insurance - This covers everything related to the loss and damage of company property due to a wide variety of events such as fire, smoke, severe weather, vandalism, etc. The definition of "property" is broad, and includes lost income, business interruption, buildings, computers, company papers and money. This is definitely one you should talk to an insurance expert about to understand your specific needs.
  • Home-Based Business Insurance - Homeowners' insurance policies do not generally cover home-based business losses. While you may be able to add on certain property damage riders to your policy, you may need to purchase additional policies to cover other risks, such as general and professional liability.

Types of Required Insurance for Employers

  • Workers Compensation Insurance - Businesses with employees are required to carry Workers' Compensation Insurance coverage through a commercial carrier, on a self-insured basis, or through the state Workers' Compensation Insurance program. Visit your state's Workers' Compensation Office for more information on your state's program.
  • Unemployment Insurance Tax - If you have employees you are required to pay unemployment insurance taxes as determined by your state. First you’ll need to register your business with your state's workforce agency. The State Taxes page on Business.gov includes links to connect you with your state's agency.
  • Disability Insurance - In the U.S., it is mandatory to purchase disability insurance only if your business is in one of six locations - California, Hawaii, New Jersey, New York, Puerto Rico and Rhode Island. You can find specific inks to these state insurance divisions here.

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