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The details of starting your own business may seem overwhelming, but one area that you should not neglect is insurance coverage. Many different types of insurance exist, including property insurance, liability, workman's compensation, group health, life, disability income, "key man" insurance and others. "You can insure against everything and anything," says Gene Fairbrother, lead small business consultant for the National Association of Self Employed. "The most important thing is to know the risks you are taking. If you want to go "bare" (without coverage), that's fine, but you need to understand what the risks are."

Another scenario in which you might want key man insurance is if you employ one sales person who generates 80 percent of all your revenues. If that person is incapacitated, it may take you two or three months to replace her. Key man insurance would cover the difference in the revenue you produce until the person can return to the job or is replaced.

Other types of insurance may be necessary or unique to your particular business. For instance, if you operate a desktop publishing business out of your own home, you may assume that your homeowner's insurance will cover any theft or destruction of computer equipment. Some homeowner's policies may, but others may set a limit on claims for computer equipment that is much less than you have invested. Check your policy or confer with your agent if you're unsure. A freelance writer who works from home may not need liability insurance separate from her homeowner's policy -- unless she has customers or clients visiting frequently. On the other hand, a book author may want to carry a policy that will protect her from libel or plagiarism lawsuits. Again, you should consult your agent if you have any questions.


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