Business insurance is like homeowner’s insurance or car insurance. It is designed to protect you from losses that may happen due to unforeseen events outside of your normal business operations. This type of insurance may cover your legal liability, damaged property or employee-related risks. When starting a business, it is important that companies evaluate their potential risks to determine the type of business insurance that they need.
What Is Business Insurance?
Business insurance helps to prevent your business from going under after a catastrophic event or accident. It is extremely important for small business owners. If your business is burned down or an employee is injured at work, you have more exposure personally than a corporate CEO does. Insurance helps you cover any business risk and prevent your personal or business finances from being harmed. The best way to find a licensed agent in your state is through the National Association of Insurance Commissioners or through your state’s department of insurance.
What Is Business Insurance: Finding the Right Option
The type of protection you need depends on how your business is structured. A corporation or LLC designation protects your property from a lawsuit. Business insurance fills any gaps in this protection in case your business encounters an unexpected catastrophe.
In some cases, you may have a legal requirement to buy business insurance. The federal government legally requires businesses that have employees to have unemployment, workers’ compensation and disability insurance. States may require additional insurance, so you should check with your state to see what you need for sure.
There are six essential types of business insurance. You should invest in insurance for anything you cannot pay for on your own.
1. Professional Liability Insurance
This insurance is for businesses that provide a service or product for customers. It protects you from financial losses due to errors, malpractice or negligence.
2. General Liability Insurance
This insurance type is for financial losses due to property damage, libel, settlement bonds or judgments, bodily injury, defending lawsuits, medical expenses and slander.
3. Business Owner’s Policy
This type of policy can work for small business owners, and it is especially good for owners who operate a home-based business. It combines typical coverage options in one bundle, which can make the insurance buying process easier and cheaper.
4. Commercial Property Insurance
This is for companies with a significant amount of physical assets like property. It protects you from damage or losses of company property because of things like vandalism, hail storms, fires, civil disobedience, wind storms or smoke.
5. Product Liability Insurance
This is for companies that wholesale, manufacture, retail or distribute products. It covers you from losses due to a defective product that may cause bodily harm or injuries.
6. Home-Based Business Insurance
This type of insurance is for businesses that operate from the owner’s home. It adds a rider to your homeowner’s insurance to protect your business equipment. It also provides liability coverage in case of third-party injuries.
What Is Business Insurance: The Next Step
Now that you know the options available, it is time to consider buying business insurance. Start by assessing your risks for lawsuits, accidents and natural disasters. To actually buy business insurance, you need to find a reputable, licensed agent. Prices and options vary, so compare rates, benefits and terms from different agents. As your business grows in size, your liabilities will increase. You need to make sure that you re-assess your coverage needs each year.