Insurance can be complicated. But when you’re running your own business, it’s a crucial part of maintaining your financial security. Consider this: the average workplace injury costs $37,000, and lawsuits can cost small businesses between $3,000 and $150,000.

Having the proper insurance can shield you from these hefty expenses. But here’s the thing: insurance isn't a set-it and forget-it proposition. As your business grows and changes, your coverage should adapt, too.

In this guide, we'll look at four business milestones and how your insurance needs change when you…

1. Open your doors

2. Invest in new equipment

3. Hire new employees

4. Sign a major contract

Stage 1 of Business Insurance: Open for Business

Every business has general liabilities – that is, common risks that crop up when you interact with the public. For example, once you open for business, you suddenly have to worry about:

• Slip-and-fall lawsuits,

• Damage to another person’s property, and

• Libel and slander lawsuits.

It's simple. Open your doors to customers, and sooner or later, someone is going to get injured on your property. Visit enough clients at their offices, and eventually, you’re going to break something. Work with enough contractors and vendors, and one day someone might take offense to something you've said.

These are your basic business risks no matter what industry you work in. To address them, most business owners seek out General Liability Insurance.

Stage 2: New Gear

As your business grows, so will the amount of stuff you have. It's like moving into a new apartment – at first, you're amazed by all the space, but eventually, you've filled every corner with knickknacks and new furniture.

The same thing happens when you run a business.

Imagine you've just started a landscaping company. At first, you’ve got a single riding mower, hedge trimmers, and the usual assortment of tools. As your business expands, pretty soon you've got a storage shed full of gear: uniforms, multiple new mowers, ladders, safety equipment...

If you take a step back, you'll realize you've invested a huge amount of capital into your physical property. In other words, it would cost a lot to replace all this gear out of pocket if, for instance, a fire burns that shed to the ground.

So at this point in your business's life, it's wise to invest in Commercial Property Insurance to protect both your equipment and the building that houses it.

Insurers can easily customize coverage to your industry and its unique risks, too. For example, because a restaurant’s capital is tied to perishable food, a restaurant owner’s Property Insurance may cover spoilage losses. So if the power goes out and a sushi shop loses thousands of dollars in fresh fish, it may be able to get money to cover its losses.

Stage 3: Your First Employees

The moment you add someone to your payroll, your risks change. Suddenly, you’re responsible for employee injuries and workplace accidents. And that usually means you'll have to carry Workers' Compensation Insurance.

So why do you need Workers' Comp?

When an employee is injured at work, you’re legally responsible for medical costs and lost wages. Workers’ Compensation covers these costs. It also gives you some legal protection from lawsuits. When your policy covers an occupational injury, an employee has less ground to sue you. So it's a win-win for you and your workers. Their injuries are covered, your lawsuit risk is reduced.

Stage 4: Professional Liabilities and Contracts

Architects, software developers, lawyers, accountants, and other “white collar” professionals may need Professional Liability Insurance to sign client contracts – especially big contracts.

But why would your client care about your insurance?

In IT and other industries, your clients want assurance that you can deliver and that your work will be high quality. And that makes sense – if a lawyer messes up, the client could be behind bars. If accountants miss a tax filing, their clients could be on the hook for expensive back taxes and penalties.

If you do make a mistake, your Professional Liability Insurance can cover your lawsuit costs. And that means it can pay for your client's losses if they sue you. For this reason, clients may require it if you're doing important work for them.

Make Sure to Plan Ahead

We started this article by pointing out that insurance is confusing, but critical. Lawsuits and workplace injuries can cost well into the six figures. As your business opens its doors, invests in equipment, hires new employees, and signs bigger contracts, your insurance needs will change.

Plan ahead for these changes. Build a relationship with an insurance broker and get information about the cost of insurance so you know what to budget for as your business grows.