As your small business grows, your insurance needs will change.
Over time, you’ll hire employees and sell new products and services. You’ll invest in equipment, and add more office space. Business owners need a number of insurance policies to protect the company from a variety of risks.
This guide will help you decide which types of business insurance are necessary to protect your company from liability.
General liability insurance
General liability insurance covers a number of legal disputes with third parties, including:
- Accidents that cause bodily injury
- Property damage
- Damage suffered, due to a defective product
- Copyright infringement
This type of insurance does not cover negligence or damage to property owned by the business. If your firm applies for permits and licenses, you may be required to have this business insurance coverage in place. All small business owners should carry this form of business insurance.
You’ll need a separate policy to ensure property.
Commercial property insurance
Property insurance protects your business property, including real estate, equipment, inventory and machinery.
This insurance coverage addresses the risk of loss due to vandalism, fire, and other types of natural disasters. Your property coverage should cover the cost of repairing or replacing your property, so you can operate your business.
Your insurance coverage may not include certain types of natural disasters. If you operate in a region where flooding is common, flood insurance may not be included in your property policy.
Discuss your property insurance policy with an insurance agent, and determine your specific insurance needs. You should also have small business insurance in place for leased property.
You can purchase business insurance policies that bundle liability coverage.
Bundle coverage with a BOP
Your insurance company may bundle a general liability policy with commercial property insurance. The Business Owners Policies (or BOP) is sold at a discounted rate. This is an easy way to reduce the price of both forms of protection.
Product liability insurance
Businesses that manufacture, distribute or sell products may be held liable for the safety of customers who use the products.
Liability insurance covers risks related to production or design flaws, as well as improper warnings and instructions. Liability coverage protects the firm if the business is sued for medical expenses due to a personal injury.
The amount of product liability insurance may vary, depending on the potential risk associated with using your products. A clothing store, for example, would have significantly less product liability risk than an appliance store.
Professional liability insurance
Professional Liability Insurance (also called Errors and Omissions Insurance) is important for people who work in professional services.
The policy protects doctors, lawyers and other professionals who provide advice from the cost of negligence claims. Some professionals are required to carry this insurance – such as physicians who are required to purchase malpractice insurance in many states.
A growing percentage of business owners work at home, and you can purchase insurance to cover home-based business needs.
Home-based business insurance
Home-based business owners commonly assume that homeowner’s insurance will cover some degree of their business liability.
Some homeowner’s policies offer riders in addition to regular home insurance, but these only go so far. An owner may consider purchasing additional coverage to cover general and professional liability risks, and the potential for loss of business income if the home office is damaged.
If you employ workers, most states require that you carry worker’s compensation insurance.
Workers’ compensation insurance
Workers’ compensation insurance is required in most states for businesses that employ workers.
The policy is a form of disability insurance. If an employee is injured on the job, the policy pays for medical costs and lost wages due to injury.
Your worker’s compensation premiums are based on the number of employees, and the type of business you operate. For example, employees at construction firms have a higher risk of injury on the job than an office worker. As a result, the construction firm will pay more in premiums.
If the business owner passes away, the loss can have a big impact on the owner’s family, and on business operations.
Business owners should purchase life insurance on themselves to protect the interests of loved ones, and the value of the company.
There are several types of insurance policies you can purchase. The policy can be used to transfer assets to your heirs, or to pay business debts.
Several forms of life insurance can protect your family from your business loan obligations, and to cover the costs of lost skills and customer relationships when a business owner passes away.
Insurance coverage can help your company start operating after a disaster.
Business interruption insurance
This insurance covers financial losses incurred while your facilities are closed or being restructured after a disaster.
The policy can pay for a temporary business location, so you can restart operations as soon as possible. This coverage is useful for retailers, manufacturers, and other businesses. Keep in mind that coverage may not start for 48 or 72 hours after the triggering event, and that your policy will have a time limit on coverage.
These policies are important for most businesses, but there are other types of insurance coverage that you should consider.
Additional insurance to consider
- Commercial umbrella insurance: The insurance coverage kicks in when another policy reaches its limit on paying claims.
- Director and officer insurance: This coverage protects company directors and officers if they are sued, based on a particular management decision.
- Cyber liability insurance: A policy that protects your firm in the event of a data breach, and customer data (names, credit card numbers) is stolen.
- Commercial auto insurance: Vehicle insurance for company cars and trucks.
Meet with an insurance agent to determine the types of insurance coverage you need for your business, and schedule a review of your policies each year. Get proper coverage in place, so that you can grow your business with confidence.