What insurance do I need to start a business in Tennessee?

I’m starting my own business in Tennessee. Do I need business insurance? What kind of insurance do I need to start my business? If I don’t purchase Tennessee business insurance, what are the risks to my new business? 

Answer:

Just about any business in Tennessee needs some kind of business insurance. The policies and the amount of coverage you need depend on the type of business you’re in and the value of your inventory and assets. 

Small business insurance is not one standard, one-size-fits-all insurance policy. Rather, it is several policies or a customized package of policies that are designed to cover your unique risks depending on the size of your business, what you do, and a variety of other factors. 

What Does A Small Business Package Include in Tennessee?

A: A typical small business insurance package in Tennessee will include the following:

• Commercial property insurance: This covers damage to a building (the structure) and its contents (computers, office equipment and furniture, supplies, fixtures, etc.) if it is damaged by a weather event, fire, theft, vandalism, and other covered perils. If you rent your space, you’ll need coverage to protect any improvements you make to the space and it’s contents, but you won’t need coverage for the building itself. The building would be covered by the landlord’s property insurance. 
• Liability insurance: This protects your business assets from lawsuits. Commercial general liability insurance, or CGL, is the most basic form of business liability insurance. It can protect your business from costs related to bodily injury and property damage claims. It pays for medical expenses, legal costs, and settlements or judgments. Your CGL policy even covers costs related to personal injury claims such as libel and slander. 
• Business interruption coverage: This protects your earnings if your business is unable to operate because of damage after a fire, hail, wind, equipment breakdown, or some other covered event. If you are forced to close your doors for a period of time in order to make repairs, this coverage pays for rent, employee salaries, lost income, relocation fees, and more. 
• Workers’ compensation insurance: This makes it possible for workers to pay their medical bills and be compensated for lost wages if they are injured at work. In Tennessee, all employers in the construction or coal mining field, and all other employers that have at least five full- or part-time workers, must cover their employees with workers' compensation insurance. It is not necessary to purchase coverage for sole proprietors, LLC members, corporate officers, or partners. However, you do have the option to do so if you wish.
• Commercial auto insurance: This is required for all business-owned vehicles in Tennessee. The minimum coverage required by the state is:  
  • $25,000 bodily injury liability coverage per person
  • $50,000 bodily injury liability coverage per accident
  • $15,000 property damage liability coverage per accident

If you drive a personal vehicle for work purposes, you should purchase hired and non-owned auto insurance, because personal auto policies usually exclude business use.

What Is A BOP? 

A: Small business owners often purchase both property and liability coverage in one convenient package called a business owners policy, or BOP. BOPs often include commercial property coverage, commercial liability coverage, and business interruption coverage in a more affordable package policy.

What other Tennessee business insurance policies should I explore? 

A: Depending on the type and size of your business, you may need additional types of insurance policies or coverage endorsements (add-ons to other basic policies) to protect various aspects of your business. These may include:

• Professional liability insurance
• Employment practices liability insurance
• Equipment breakdown coverage
• Contamination and spoilage coverage
• Cyber liability insurance
• Commercial umbrella insurance
• Crime coverage
• Flood insurance

Some employers may choose to provide a variety of employee benefits as well, including group health insurance, dental insurance, and others.

Are There Specific Policies for Specific Industries in Tennessee? 

A: Construction companies may need additional types of construction insurance as well as various types of bonds in order to obtain new business. Manufacturers, restaurants, retail establishments, and many more types of businesses will need a combination of coverage types that address the exposures they face while doing business. 

What are the risks of not having business insurance in Tennessee?

A: Business insurance is beneficial for just about every business in Tennessee. That’s because it helps protect your financial assets and physical assets from the costs associated with covered losses involving lawsuits, property damage, theft, vandalism, loss of income, and employee injuries and illnesses.

Without business insurance, you’d have to pay out of pocket for these types of claims, and in many cases, a large claim could lead to bankruptcy. 

Some of the main risks of not having business insurance in Tennessee are: 

• Property loss or damage after a fire, a tornado, or another severe weather event
• Property loss or damage after theft or vandalism
• Lawsuits due to claims of negligence on the part of your business (you’re sued after someone gets hurt on your premises, or one of your products causes an illness or injury)
• Failing to comply with legal requirements leading to fines or worse (fines are imposed on businesses who do not purchase workers’ compensation insurance)
• Costly worker injuries with little financial protection for the employees or your business 
• Reputational damage or failure to secure work (business insurance helps build credibility for your business, bolster your reputation, secure business, and comply with certain contracts)

Ultimately, business insurance offers even more than financial protection. It provides peace of mind that you’ll have the ability to pay when something goes seriously wrong.