Knowing what type of insurance your business needs is not as easy to discern as you might initially believe. There are many types of business insurance because there are many types of businesses. Most primary coverages include the things that most businesses will need, but specific businesses carry their own distinctive set of risks that may require specific types of insurance solutions in addition to general coverage. Even businesses in the same industry may need different insurance coverages.
Deciding among the many types available can be confusing and difficult. The best way to start is to think about what types of issues might arise in your particular business. Are you located in an area that is more likely than other areas to be burglarized or vandalized? Are you concerned about potential employee illness or injury? Will you need to protect yourself from claims of liability or negligence against your business? Are you filing for a patent that will require you to purchase intellectual property insurance?
Considering the answers to these questions will help you analyze what type of protection you will need. Then you will need to compare those needs to what you learn about specific business insurances and what they will and will not cover. Finally, you will need to choose a company that employs more than an apt slogan generator and inspires true confidence in its ability to protect you from losses.
While there are many types of business insurance, most businesses will need the basic primary insurance coverages like General Liability and Commercial Property Insurance. Small businesses may opt to purchase both of these, as well as Business Income Insurance. Many businesses may also need Commercial Auto and, if they have employees, they will also need Workers’ Compensation Insurance. Beyond these, consider the unique risks presented to your company, and then look at additional coverages that are available.
What are the Primary Insurance Coverages?
- General Liability Insurance. This coverage protects your company from liability claims made by consumers against your business. It might include customer slip and fall accidents or damages to someone else’s property caused by you or one of your employees. It covers the expenses related to non-employee injuries that happen at your business location, damage to someone else’s property, and advertising mistakes. If your business is sued and the lawsuit is covered, the insurance company can help pay for legal expenses, including attorney’s fees and settlements.
- Commercial Property Insurance. This type of insurance covers your company’s physical property including equipment, furniture, inventory, and other real property from the costs of property damage. It also restores the property in your business to its original condition before the covered loss or damage. The policy may also cover the loss of income or increase in expenses that arise from fortuitous causes, except those that are specifically excluded.
- Professional Liability Insurance. This helps protect your business from claims that there were errors made when providing professional services. It is also called professional indemnity insurance and errors and omissions insurance. It protects advice- and service-providing companies from bearing the full costs of defending against a negligence claim made by a consumer and damages that may be awarded in a civil lawsuit.
- Workers’ Compensation Insurance. This coverage provides benefits to employees who become sick or injured on the job. If an employee were to die due to a work-related injury or illness, this insurance coverage also provides benefits to the employee’s family. It is required coverage in most states for companies that have employees because it covers lost wages, medical treatment, and services needed to help an employee fully recover and return to work.
- Business Income Insurance. This coverage, also known as Business Interruption Insurance, can help replace lost income if your business is rendered unable to operate because of a covered loss or damage to your business property. A typical clause in such insurance reads as follows: “We will pay for the actual loss of business income you sustain due to the necessary suspension of your operations during the period of restoration.”
- Business Owner’s Policy. Because most businesses will need General Liability, Business Property, and Business Income Insurance, a Business Owner’s Policy bundles these into a single policy for ease and convenience, but it is important to remain aware of the exclusions that might be included in this particular policy.
What are some additional coverages?
Some additional coverages your business may want to consider are Data Breach Insurance, which helps cover costs associated with a business-related data breach; Commercial Auto insurance, which covers liability and physical damage to automobiles owned and used by a business; Intellectual Property Insurance that covers the costs of defense of intellectual property infringement suits and any resulting settlements or judgements; and Commercial Umbrella Insurance that extends your business liability coverage should it exceed the limits of the primary policy.
What are some thoughts or questions you have about additional coverages? Feel free to comment below.