One major concern for many small businesses and sole proprietors is what type of insurance is required in New York. Below is a brief description of the most important types of policies you should consider:
While a number of private insurance companies offer health insurance for sole proprietors, New York has a special program, Healthy New York, that aims to promote and provide affordable insurance coverage to both sole proprietors and small businesses that do not currently offer health insurance to their employees. To apply for the program, click on the following link: Healthy New York Application for Individuals and Sole Proprietors.
Additionally, the New York State Department of Insurance compares health insurance programs from several companies in this chart.
Basic disability insurance is used to replace the owner’s income in the event of a disability. This type of insurance is often ignored despite the risk of becoming disabled being far higher than the risk of dying prematurely.
Another type of disability insurance known as Business Overhead Expense Insurance is designed to allow a small business to stay viable while its owner recovers from a short-term disability.
Other potential disability insurance options to consider are policies that help fund the buyout of the disabled owner’s share or insuring an employee if the business is dependent on the skills of that key person.
A sole proprietor life insurance policy specifically deals with what will happen to your business in the event something happens to you. Life insurance helps to ensure that your family will not be responsible for the debts of the business and will help to avoid a forced liquidation to pay those debts.
Life insurance is also the most efficient way to fund a buy/sell agreement in a closely held corporation, partnership or LLC. A buy/sell agreement is a contract among business owners that allows the other owners to buy the deceased person’s interest in the business.
If you have one or more employees, you are required to carry unemployment insurance in New York. A useful publication is the Employer’s Guide to Unemployment Insurance, Wage Reporting and Withholding Tax.
A sole proprietor without employees is not required to pay unemployment insurance taxes on his/her salary, but a stockholder/employee of a corporation must.
Workers’ Compensation Insurance
If you have employees in New York, you are required to obtain workers’ compensation insurance from either an insurance carrier authorized by the New York Workers’ Compensation Board or you may self-insure if authorized by the Board. The cost of this insurance must be borne entirely by the employer. This coverage is not required for a sole proprietor with no employees. It is important to know that a sole proprietor with employees is not automatically covered but must elect to be included by filing a Form C105.32. This form must also be elected by partners and members of an LLC or LLP.
Property and Casualty Insurance
All small businesses, including home-based businesses, should carry property and casualty insurance in case of loss for inventory, equipment and potential injuries to customers, vendors and employees.
The above list is not intended to be complete. Your small business may have specific requirements that depend on the type of business (for example, malpractice insurance is certainly high on my list of necessary insurance coverage). If you have any other suggestions, please feel free to contact me or comment below.