More than 75 percent of businesses are underinsured, and 40 percent do not have any insurance. What happens if you don’t have the right amount of insurance? Simply put, you could lose everything even if you did nothing wrong.
Running a business comes with a lot of choices and learning curves. Here are some of the different types of business insurance you may need.
If you own or lease your space, you need to have property insurance for your business. This covers all your inventory, equipment, furniture, and signage if there is a disaster like a storm, fire, and theft.
If you live in an area prone to earthquakes or floods, standard policies do not cover these losses. Be sure to talk to your agent about additional coverage.
The business property insurance also includes money you would need to keep your business running after the loss and until it can be repaired. This policy would also cover additional expenses to protect your business from additional damage such as removing debris.
If you have a home-based business, your standard homeowner’s policy will not cover your business equipment. You need to add additional coverage for your business even though it is inside your personal property.
General Liability Insurance
You can be sued for any damages from your business services or if someone is harmed on your property. A general liability insurance policy pays for your legal expenses along with damages. This policy also covers medical expenses if someone is hurt.
There are additional types of liability insurance depending on the nature of your business. General liability is a must if you have a property or offer service, but you may need additional types of liability insurance if you have a medical practice, sell products, and for security firms.
Professional liability insurance (or errors and omissions) covers claims that your business had an error or missed something like a simple clerical mistake. Think about this scenario, you own a technology firm and your program fails a business costing them thousands of dollars because of a simple programming issue—this is where your professional liability insurance covers you.
If you make and sell products, you will need a product liability policy to cover any damage caused by your product. This covers losses even if every security measure was taken. Product liability also covers any costs and claims from faulty products.
If your company uses vehicles, you need commercial automobile protection to cover any liability and damage from an accident. If you are delivering goods for a fee, the standard automobile policy will not cover any damage.
You should at least cover against third-party injury, but a comprehensive policy is best to cover damages and liability. You don’t want to solely rely on an employee’s personal auto policy to cover damages.
Most states require workers’ compensation insurance for businesses. This is for companies that have a certain amount of employees and varies between states.
The workers’ compensation policy protects employees that are injured while working. This policy pays for lost wages and medical care. It does not matter who is at fault for this policy.
If an employee dies, this policy will pay the person’s family for lost wages and benefits. If you have a small business with few employees, you may not be required to have this policy. Even if you are not required, it is probably a good idea to have this policy to protect yourself from any legal liability if someone is hurt on the job.
If you have to suspend your business operations because of a disaster or another unexpected event, business interruption insurance is an endorsement that covers your operating expenses. This policy will help you keep your business operating even if you have to stop operations for a certain amount of time until you can start normal operations.
If you are worried your limits are not enough, a commercial umbrella extends your liability limits. For example, if your liability limits are $500,000 and you have a claim that costs you $750,000, your commercial umbrella policy kicks in and covers the additional $250,000.
Umbrella policies are a safety net for your business to protect you from any costly liability claims. These claims include not only damages but also medical bills and legal fees, so they can add up quickly.
For businesses that work with or store sensitive information, they need a data breach policy to cover against a breach. Your business is responsible for this information, and if it gets in the wrong hands, this policy protects you from this loss.
Insurance companies offer cost savings to small businesses by offering a package policy that combines general liability, property, and business income. The small business owner’s policy (BOP) is tailored to various types of businesses and can lower the costs of purchasing all these policies separately. It’s also more convenient because all the coverages are in one policy.
Talk to your insurance agent about bundling your policies. Some insurance companies offer these policies for each type of business such as a florist, beauty salon, and other small businesses. You can add endorsements to your policy to add additional coverage.
Typically, these policies are best for businesses with revenues under $5 million and fewer than 100 employees. Not all businesses qualify for BOPs because of associated risks, like a restaurant.
Even if you don’t qualify for a BOP, talk to your agent about ways to bundle your coverages to save money. There is not a one-size-fits-all policy out there for businesses.
Different Types of Business Insurance Final Thoughts
Don’t risk everything by not having talked to your insurance agent about these different types of business insurance. Insurance is worth the money and is just good business.
Business insurance is different than personal insurance because it can be tailored to fit the needs of your business, and your insurance agent can make sure you have the right coverage. It’s vital that you review your business insurance regularly.
If you are looking for other business advice, check out our site for some helpful tips. Read articles like how to be a successful entrepreneur.