What is business insurance?
Business insurance coverage protects businesses from losses due to events that may occur in the ordinary course of business. There are many types of insurance for businesses, including coverage for property damage, legal liability and employee risks. Businesses assess their insurance needs based on potential risks, which can vary depending on the type of environment in which the business operates.
Understanding business insurance
It is especially important for small business owners to carefully consider and assess their business insurance needs, as they may have more personal financial exposure in the event of a loss. If a business owner does not feel able to effectively assess the business risk and the need for coverage, they should work with a reputable, experienced and licensed insurance broker. You can get a list of licensed agents in your state through your state’s insurance department or the National Association of Insurance Commissioners.
Several types of business insurance that small business owners might consider:
Professional liability insurance
Professional liability insurance insures against claims for negligence resulting from errors or failures. There is no universal professional liability coverage. Each industry has its own concerns which must be taken into account.
Property insurance covers equipment, signage, inventory and furniture in the event of fire, storm or theft. However, it does not cover events of mass destruction such as floods and earthquakes. If your area is at risk for these problems, you will need a separate policy.
Home insurance policies do not cover home-based businesses like commercial property insurance covers businesses. If you operate a home-based business, find out about additional coverage for equipment and inventory.
Product liability insurance
If your business makes products for sale, product liability insurance is very important. Any business can be named in a lawsuit due to damage caused by its products. Product liability insurance protects a business in such cases.
All vehicles used for business must be fully insured. At the very least, companies should insure themselves against injury to third parties, but comprehensive insurance will also cover the vehicle in the event of an accident. If employees use their own cars for business, their own personal insurance will cover them in the event of an accident. A major exception is if a person provides goods or services for a fee, including delivery personnel.
Interruption of work insurance
This type of insurance is particularly applicable to businesses that need a physical location to do business, such as retail stores. Business interruption insurance compensates a business for loss of revenue during events that disrupt the normal course of business.