Insurance is one of the most important considerations of self-employed individuals, because lack of the right coverage can put you out of business overnight. Think of this scenario: a client comes to your home office to discuss his project. But as he was walking down your stairs, he tripped, fell and broke his shoulders. Are you prepared in the event that he sues you for hospitalization expenses? Is this kind of expense covered by your homeowner's insurance?

Or what will happen to your business if your house is burned in a fire and everything about your business - from your computers, to your files and record, to your inventory - are all inside your home office?

A sound insurance protection for your business is as important as a good organizational plan. It takes good planning to determine what insurance is necessary to minimize your risks and protect your business. However, a 1999 study from the Independent Insurance Agents of America estimates that at least 60 percent of home businesses are not properly insured, and more than 70 percent of the underinsured thought they were covered by their homeowner's insurance or didn't know they needed additional insurance.

In starting a business, there are a number of financially dangerous financial situation that you can overlook. The term "risk management" is often is often used of an insurance plan. Risk management is a planned approach by the business owners to avoiding losses of assets, lawsuits, or losses of earning power.

Today, small office/home office (SOHO) business insurance policies are fairly easy to obtain, depending on your business. As your business grows, however, so do your insurance needs. However, you need to consider carefully the various types of insurance customarily available to small businesses to avoid spending money on coverage that you don't really need.

Here are some forms of insurance that you and your small business will require:

• Property insurance protects the business against the loss of assets. Insurance can be purchased that will pay the amount needed to replace lost assets at the current replacement value. Property insurance costs vary depending upon the type you choose.

• Homeowners' Insurance can help ensure that a non-business casualty or liability will not drag down your business. The most common type covers things like: damage to home and personal properties caused by fire, lightning, wind or storm; medical payments for occupants for injuries caused by fire, lightning, wind or storm damage. It can also cover medical and legal liabilities to persons injured by accident while in the home. It also provides a rider that can be attached to cover loss or theft of personal property such as computers and equipment including copiers, fax machines, scanners, and printers.

• Fire insurance covers losses from fires and can be extended to include damage from smoke, storms, hail, explosions, or vandalism.

• Auto insurance covers damage to business vehicles caused by fire, theft, or collision, and damage the vehicle causes to others. It also provides compensation to persons who would be able to sue you for personal injuries, medical payments, loss of earnings, or damage to their property arising out of an auto accident.

• Theft insurance covers losses resulting from the unlawful taking of property owned by the business. Theft coverage can also protect businesses from loss or liability due to computer and non-computer related fraud and theft. This kind of insurance also provides protection from employee activities such as: dishonesty, disappearance, and destruction of property; theft; credit card and deposits; forgery; and computer crime such as "Electronic Data Processing," "electronic funds transfer," and other forms of "electronic and computer crime endorsement." 

• Fidelity insurance covers losses from frauds and thefts by employees and in some cases by third parties. These policies and bonds may generally be called "crime insurance." For example, cashiers in a jewelry store are likely to be covered by a fidelity insurance policy, which is often referred to as bonding. It also provides insurance coverage for loss of property (money, securities, CDs, notes, deeds, mortgages, precious metals, electronic records, etc.) while the property is on the company's premises wherever located) due to theft, false pretenses, misplacement, mysterious disappearance or damage. For any service that requires employees to enter customers' homes or offices, the employees should be bonded to cover potential theft.

• Liability insurance protects you against claims made by people who have suffered bodily injury while on your premises or their property - even if you work at home. You can be sued for hospitalization costs and loss of income if, for example, a delivery person slips on ice on your doorsteps or a customer suffers bodily injury while in your home on business.

• Product liability insurance protects businesses against claims for damages resulting from the use of the company's products. Everyday, we hear about companies that have withdrawn a product or have been sued as a result of a product liability issue. For others, this insurance is simply too expensive to buy, and some feel that it is simply not for them given the nature of their business. However, manufacturers, wholesalers, retailers, and service companies are all candidates for product liability insurance. To guard against product liability suits, a small business owner need to set high quality standards for their  products or services to avoid possible injury.

• Professional liability insurance covers claims for malpractice and should be considered by anyone selling a service. This is particularly important if you provide advice or services to the public where significant liability could result if something went wrong. Most of us are familiar with medical malpractice cases. However, psychologists, management consultants, and others selling advice might also wish to protect themselves from lawsuits claiming malpractice.

• Health, disability, and life insurance are of concern not only for the owner, but also for employees. It is essential that you have health insurance to cover medical expenses and disability insurance to cover loss of income due to disability. Employee benefits may include group life, group health, and disability insurance. Providing health insurance for yourself and your employees is an expensive proposition. Many small businesses require employees to pay part of the insurance cost. Key person insurance (i.e., life insurance) is recommended to protect the business from loss in the event of death of a valuable employee or partner.

• Workers' compensation insurance provides income and payments of medical costs if you or your employees are injured on the job. It is mandatory to provide a minimum level of workers' compensation insurance to all employees. Even if you are trouble meeting other bills, don't let your workers' compensation insurance payments lapse because this insurance is governed by state laws and varies among the states. Workers' compensation rates depend on the amount of salaries covered, job hazards, and the company's safety record.

• Business interruption insurance protects against loss of business income. It will cover specified expenses if a business is temporarily shut down--for example, in emergencies such as closure for remodeling following a fire, a strike by employees, or an interruption in utilities