While you may believe that forming a limited liability corporation or another type of business structure may shield you from liability stemming from business practices, this is not always the case. Businesses have unique insurance needs. The proper type of insurance can help businesses protect their interests and avoid daunting liability. The particular insurance that you should purchase depends on the type of business you run and what you need to protect. Some common forms of insurance that business owners secure include the following.
General Liability Insurance
The first type of business insurance that the Small Business Administration recommends is general liability insurance. This type of insurance is the most common and protects the business, business owner and employees from damages that result from bodily injury, property damage, the cost of defending a lawsuit and others. Sometimes, business owners can add other forms of insurance with their general liability insurance, such as accounts receivable protection.
If your business owns real estate, property insurance is a must to protect against damage caused by fire, flood, theft or vandalism. Property insurance can also protect personal property in the building or even in your home office, such as office equipment, computers, fixtures, equipment, inventory, furniture or tools. Homeowner’s insurance does not always cover home-based business losses, so it is important to inquire about this insurance for your business.
Small Business Insurance
Some insurance companies bundle a variety of insurance products and sell them under the umbrella of small business insurance. Typically, this type of insurance can cover liability and property damage claims. It can also replace lost income due to a business interruption in certain situations. Business owners may be able to add various insurance products to their small business insurance policies, such as:
- Workers’ compensation insurance – This insurance provides medical and wage replacement benefits to workers who are injured or develop an illness that is job-related.
- Business income insurance – This type of insurance replaces lost income due to a temporary suspension of business operations caused by a covered incident.
- Commercial auto insurance – This type of insurance covers the costs associated with automotive accidents involving the business owner or employees during operations. A policy may be available to cover non-owned company vehicles if employees use their own vehicles for work purposes.
- Commercial flood insurance – This insurance covers the cost of damages caused by floods. Flood insurance is typically not part of a typical property insurance product, so this must be added on to protect against this risk.
- Commercial umbrella insurance – This type of insurance fills in the gap between the general liability insurance and a liability claim. It provides a safety net in case of excess liability costs.
Data Breach Insurance
Today, businesses must stay aware of potential breaches in their security measures if they store sensitive or confidential information about customers or employees. A data breach policy can provide protection against losses or liability stemming from a data breach.
Small business owners often take life insurance policies out on each other. In case a business partner dies, the remaining owners are protected with the investment of life insurance. Life insurance is also important for small business owners to use to ensure that they leave adequate amounts of coverage for their surviving spouse or minor children. Life insurance can replace a certain number of years’ income in case the business owner passes away.
Professional Liability Insurance
Professional liability insurance or errors and omissions insurance provides for the legal defense and damages stemming from providing professional services. Professionals such as accountants, consultants, lawyers, notaries, real estate agents, hair salons and technology providers can use this type of insurance to guard against claims that they did not properly render professional services.
Consult an Insurance Broker
Your needs for insurance depend on many factors, including what you want to protect and the type of business you have. Consult with an experienced insurance broker that provides policies for small and mid-sized companies to get advice on what insurance will be best for you.