The answer to this question will differ for each business owner. But here are the 3 reasons why most businesses end up purchasing insurance in their first year of operation.
1. A Key Entity Requires It- Many landlords will require proof of liability insurance. State licensing boards will often require proof of insurance. Distributors or resellers of your product will most likely require insurance. Even your lender may require you to have insurance.
2. Expensive Property- if you are buying or leasing expensive property in order to run your business, you should and may be required to insure this. Even if your property is at your home, you may find that your homeowners’ insurance either has an exclusion for business property, or cannot insure the property at the limits requested.
3. Employees- in many states, once you hire your first employee workers compensation coverage is required even if that employee is part time and, in some cases, even if you don’t withhold taxes from that person’s pay (i.e., they are 1099).