As an entrepreneur, you know you have to be a risk-taker. To be a successful entrepreneur, the risks you take must be calculated. What risks can you afford to take, what losses could you manage, what should you insure? Your business and personal situation will determine your needs. Your business may have many assets - vehicles, an office and equipment, inventory, an indispensable employee or partner and most importantly, yourself.

As owner and operator of your business, it is essential that you have disability insurance. It does not have to be expensive. Because new businesses often fail in their first year (70% of them), insurance companies are reluctant to insure self-employed persons individually. You can get insurance at surprisingly low rates by joining a professional or business association to qualify for group rates. Organizations such as Small Business Resources of Alberta include core insurance with their membership with the option for additional insurance. They know that insurance to cover income if you are temporarily disabled is very important for self-employed persons. The Better Business Bureau also offers insurance at a good rate because it has thousands of members.

Use your insurance agent as a resource for information. Give your agent the full story of your business, it's the only way he or she can provide the advice you need. Ideally, the agent can present a commercial insurance package that will cover all aspects of the protection you need. This business package should include insurance related to the owner or prinicpals involved in the business, property belonging to the business or used for business purposes, liability insurance for protection against law suits for nonperformance of a contract or product.

Following are descriptions of the various types of insurance, a brief description of what they generally cover, and why you may need them.

Insurance for Owners, Partners and Key Employees

• Life Insurance
  
  This protects the family and is especially important in a sole proprietorship because the owner is personally liable for all debts of the company.
  
  
• Disability Insurance
  
  This insurance is designed to cover income for up to 52 weeks. Because you are self-employed, you do not have a benefit package to cover life and health insurance. As someone whose livelihood depends on your health and ability to run your business, disability insurance is essential. Any payments made for disability, health and dental insurance along with professional membership fees are tax deductible which further reduces the cost. Of course, then you do not claim the actual expenses because you will be reimbursed through your plan.
  
  
• Critical Illness Insurance
  
  This is a personal insurance policy that provides a tax free lump sum benefit to a business owner if he or she is diagnosed with a critical illness such as a stroke, heart attack, cancer.
  
  
• Partnership Insurance
  
  Designed to protect a surviving partner and the business by allowing him/her to purchase the shares of the deceased to continue the business and offset the tax liability that would otherwise exist without the buy-sell agreement.
  
  
• Key Person Insurance
  
  This policy covers the cost of the loss of an integral member of your business team. If the essential person should be unable to work for a period of time, the insurance helps to cover the loss of business as a result of the illness or injury.

Business Property and Liability Insurance

• Vehicle Insurance
  
  Your personal vehicle insurance will be inadequate if you use your vehicle for business purposes. It is essential to have a policy that includes the use of your vehicle for business to cover damage to your vehicle and any responsibility you may have to others.
  
  
• Product or Service Liability Insurance
  
  Protects you in the event you are sued by a client/customer for nonperformance of a contract or a product and any liability arising from the nonperformance.
  
  
• General Liability
  
  Covers injury to clients and employees on your premises or elsewhere either in the performance of duties for the company or involving activities of the company.
  
  
• Business Premises and Contents Insurance
  
  Whether your office is in your home or elsewhere this insurance covers damage, loss or theft of property. If you work from home, it is unlikely your basic house and contents insurance will be adequate. Be sure your existing homeowner's policy is not voided by the operation of a business on the premises.

You may be thinking "I only have a small part time business at home so I don't need extra insurance." You could be surprised to discover that your home insurance company considers business activity of any kind is business activity. For example, the delivery of a business item to your home could invalidate your insurance. Deliveries are common practice, but if it's for business, you need insurance.

Small Business Insurance packages are available that cover damage or loss to business inventory and can include basic coverage for business liabilities, loss of earnings, and errors and omissions. You need to be sure that the package covers what you need – and not what you don't. Talking to your broker and having a plan specifically for your business may meet your needs better than a generic package.

You may want to talk to an insurance agent with whom you have previously done business – someone who knows you, your situation, and is interested in providing you with the best possible coverage at the best price. As noted previously, checking into the plans offered through professional and business organizations could give you the basic insurance you need at a cost you can afford. If you choose to compare insurance packages, be sure to compare the protection you will receive as well as the cost of the plans. Remember that policies only cover what is in the fine print; be sure to discuss exactly what the policy covers with your agent.

Insurance is an important way to manage risk in your business.