Types of Business Insurance
Running a business is a challenging affair, at least for the majority of people. And even when it seems like everything is seamless, from operations, sales, to massive profits, one catastrophic event, accident, or lawsuit can bring the whole business to its knees, regardless of how old it is. This necessitates the need for business insurance for all kinds of enterprises whether start-ups or established corporations. Business insurance not only protects vital machinery and equipment but also provides financial support if the enterprise cannot operate. While there is a wide variety of business insurance policies on the market, ensuring that you get the right coverage for your business is key.
Here are some vital business insurance components:
1. Professional liability insurance
Also regarded as errors & omissions (E&O) insurance, professional liability insurance provides coverage for a business against harm that occurs due to mistakes made by the enterprise and even the failure to perform as per contract stipulations. For instance, if the business is sued for the failure to perform as per given contract terms, professional liability insurance will cater to the legal fees.
2. Liability Insurance
Business operations are exposed to lots of liabilities, from legal actions taken by others due to negligence to defective products. Liability insurance caters to legal expenses as well as damages if the business is sued beyond its limits. Liability insurance also caters to medical expenses incurred by other persons in the course of business operations.
3. Workers compensation insurance
This insurance provides coverage for lost wages and medical care to employees who are injured while on the job regardless of who was at fault. And in case of death, workers’ compensation insurance will remit the compensation benefits to the deceased family. While this is not mandatory insurance for small businesses (depending on location), it is an essential policy since it protects the business from legal liability when employees are injured on the job.
4. Business interruption insurance
Business operations can be interrupted by a catastrophic event or even a disaster. This insurance provides coverage for such interruptions and offers compensation for the loss of income resulting from such events. The most common type of business interruption insurance applies to businesses that must have a physical location to operate. For instance, if the locations are inaccessible, the company will be compensated for the staff’s inability to manufacture products, work in the office and even make sales calls.
5. Property insurance
A business property insurance will cater to damages to your business due to an insured peril. While business property insurance differs with insurance providers, most insurance companies provide coverage for the place of business as well as office inventory including computers, office furniture, and other items that are essential for the operation of a business. Some business insurance providers also cater for expenses that may be incurred in efforts to protect a business from further damage. For instance, if a business location is burnt down, an insurance provider may cater for debris removal. Also, depending on the coverage provided, you may get funds to help the business to continue operating until the damage is managed.
6. Commercial auto insurance
Just when you thought that you are all set for business operations, your van is involved in an accident. Without commercial auto insurance, most business operations can be halted easily. And since most businesses rely on their motor vehicles, whether trucks or vans for operations, commercial auto insurance should be a necessity. If you have a personal auto policy, assuming that the policy provides coverage for commercial operations is wrong. Commercial auto insurance provides coverage for property damage or bodily damage caused to other persons while operating the auto vehicle. However, insurance providers have a limit up to which these occurrences will be compensated.
There is a wide range of business insurance policies. However, your insurer can tailor them to the needs of your business.
Here are some business insurance add-ons that are essential for businesses:
Unfortunately, terrorism has become increasingly rampant. And it’s also unpredictable. Whether you live in an area that is prone to terrorist attacks or not, it might be a good idea to protect your business against losses incurred as a result of such events.
Business interruption insurance
Also referred to as Business Income Insurance, this is a coverage that caters to operating expenses due to the occurrence of an unexpected event or a disaster until the business can resume operations. It is an endorsement of a Commercial Package Policy (CPP), a commercial property policy, or a Business Owners Policy.
Data breach insurance
Most (if not all) businesses deal with very sensitive information. Customer data such as names, contact information, and even bank details can cause vast problems if accessed by unauthorized or unscrupulous persons. For instance, if your business data is hacked, you can be sued. Data breach insurance provides coverage for legal liabilities to businesses from data breach situations.
Employment practices liability insurance
Businesses should not discriminate against race, age, sexual orientation, or even worse engage in wrongful termination practices. However, you could find your business facing legal cases arising from such issues. Employment practices liability insurance protects businesses from such employee-related claims.
Professional indemnity insurance
This is a coverage that protects professionals such as consultants from claims such as suffering or losses due to advice provided by a professional. For instance, a consultant may advise a business to carry out a business in a certain direction. Although not with an ill-motive, this can result in major losses, leading to legal issues.
Directors and Officers insurance
This insurance provides coverage for directors or the management team against claims by the public, employees, investors, regulators, and even other directors.
What factors should you consider before purchasing business insurance?
- Your insurance needs- This is the most important step in ensuring you get the right business insurance. What is your line of operation? How many employees do you have? What are the risks involved?
- Your budget- While insurance will safeguard your business against the insured perils, it can be expensive. Always work with an affordable budget. However, be sure not to under-insure.
- The terms and conditions of the insurance- If you are not keen enough, you may just go ahead and sign a business insurance policy without keenly reading the terms and conditions. Some people get surprises when making a claim. Ensure that the insurance exceptions are laid out.
- What insurance is mandatory in your state? – Since mandatory insurance differs from place to place, ensure you know which coverage is mandatory.
While all these types of business insurance are vital, ensuring you understand the insurance needs of your businesses is key. Pro tip: It is safer to over-insure rather than under-insure.