Micro Lending Company Insurance
Every micro lending company needs insurance. Knowing which type of insurance you need and the best place to get it is the next step.
This article will cover the main types of business insurance and help you find the best micro lending company insurance.
Best Insurance for a Micro Lending Company
The most common and comprehensive type of micro lending company insurance is general liability insurance. We recommend general liability insurance as your first line of defense against a variety of the most general and commonly occurring claims.
Some of the risks general liability insurance covers are:
- Bodily injury
- Property damage
- Medical payments
- Legal defense and judgment
- Personal and advertising injury
While a micro lending company isn’t legally required to carry general liability insurance, operating without it is extremely risky. If your micro lending company is sued, you could face fees totaling hundreds of thousands of dollars (or more).
Cost of General Liability Insurance
On average, microlending companies in America spend between $400 - $700 per year for $1 million in general liability coverage.
Compare the average cost of general liability insurance for a micro lending company to other professional industries using the graph below.
Several factors will determine the price of your policy. These include your:
- Number of employees
- Per-occurrence limit
- General aggregate limit
You may be able to acquire general liability insurance at a discounted rate by purchasing it as part of a business owner’s policy (BOP) rather than as a standalone policy.
A BOP is a more comprehensive solution that includes multiple forms of coverage, such as business interruption and property insurance.
Common Situations That General Liability Insurance May Cover for a Micro Lending Company
Example 1: As a potential investor tours your microlending company, she trips on some uneven flooring, breaks an arm, and demands your business pay for her medical treatment. General liability insurance would cover her medical expenses.
Example 2: A competing lender sues your business for libel. While you’re unaware of an instance in which you libeled his company, you know you need a lawyer to protect your interests. General liability insurance would cover your legal fees and any required settlement.
Example 3: While visiting your company to write a story about microlending, a reporter slips on some wet flooring in the restroom, breaks a wrist, and decides to sue your business because you didn’t display a “wet floor” sign. General liability insurance would cover your legal defense and any required settlement.
Other Types of Coverage Micro Lending Companies Need
While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of. Below are some of the most common types of coverage:
Professional Liability Insurance
While you strive to provide sound advice to your clients, there’s always a chance someone might decide you made a mistake and claim your professional guidance caused them injury. If a client sues your business for negligence, professional liability insurance would cover your legal fees and any required settlement.
Workers’ Compensation Insurance
Most states require businesses to carry workers’ compensation insurance for their part-time and full-time employees. This coverage protects your employees if they become injured at work or fall ill after a work-related accident. It not only covers an employee’s medical bills and lost wages if they need time to recover but also any disability or death benefits stemming from a workplace accident.
Data Breach Insurance
Your microlending business could make a tempting target for online hackers given the amount of sensitive data you collect to help your clients. This coverage — also known as cyber attack insurance — protects your business from liability if a cybercriminal hacks into your computer system, steals sensitive client data, and your clients sue you for damages. In the event of such a lawsuit, data breach insurance would cover your legal fees and any settlement payouts.
Commercial Umbrella Insurance
While your general liability insurance policy covers most claims, some accidents or lawsuits may be so catastrophic that they threaten to exhaust the limits of your primary coverage. Commercial umbrella insurance protects you from paying out-of-pocket for any legal fees and awarded damages that exceed your primary policy.
Additional Steps To Protect Your Business
Although it’s easy (and essential) to invest in business insurance, it shouldn’t be your only defense.
Here are several things you can do to better protect your micro lending company:
- Use legally robust contracts and other business documents. (We offer free templates for some of the most common legal forms.)
- Set up an LLC or corporation to protect your personal assets. (Visit our step-by-step guides to learn how to form an LLC or corporation in your state.)
- Stay up to date with business licensing.
- Maintain your corporate veil.
Micro Lending Company Insurance FAQ
Yes, absolutely. You will need to first get a quote from an online business insurance provider like Next Insurance. Next allows you to then purchase a policy immediately and your coverage will be active within 48 hours.
A typical business owner’s policy includes general liability, business interruption, and commercial property insurance. However, BOPs are often customizable, so your agent may recommend adding professional liability, commercial auto, or other types of coverage to your package depending on your company’s needs.
You should invest in business insurance coverage for your business before your first interaction with a customer. Although the cost of insurance may seem high for a brand new business, it’s best to be proactive when it comes to protecting your assets. After all, you can’t buy insurance to cover a loss that has already occurred.
An LLC doesn’t protect your business assets from lawsuits and liability– that’s where business insurance comes in. Business insurance helps protect your business from liability and risk.