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Why You Need Business Insurance

Business owners cut expenses where they can. Business insurance should not be one of those places. Bad things happen to the best business people. Business liability insurance helps you get over the bad times. 

There are many kinds of large and small business insurance. There's also specialty insurance for unique situations. This article discusses different types of business insurance and reasons why you might need more than one insurance policy.

Reasons To Have Business Insurance

Nobody wants to think about possible negative events in their lives. That's true for our business lives as well as our personal ones. Small business owners want their companies to run without any issues. 

People being people, that will never happen. Here are some of the top reasons you need insurance coverage.

Theft

A common cause of business owners' insurance claims is loss due to theft and burglary. Theft takes many forms, both internal (done by employees) and external (by customers and others). Possible examples include:

  • You arrive at work one morning to find thieves have stolen all your computer equipment. You need coverage for burglary, property damage, and data breach.
  • One of your warehouse employees has been taking electronic equipment and selling it from their house. General liability insurance covers embezzlement, a type of fraud, but your warehouse needs commercial property insurance. You may need liability coverage if the theft affected other customers.
  • Your notary service funds have been coming up short, and you discover one of the notaries has been pocketing their fees. Fidelity bonds cover losses caused by bonded employee theft, separate from other types of employee theft.

Property Damage

Business property is a major investment for any business owner. Real property, furniture, and fixtures can be expensive. Property coverage may not replace everything you lose, but it can give you the money to make a good start. Possible claims can include:

  • A fire damages your building, and equipment losses prevent you from reopening for three months. Profit loss and business expenses total $150,000. Business interruption insurance can cover the lost income and fire insurance.
  • Hurricane Zelda pummels the coast, flooding your kitchen and parking lot. Flood insurance and additional natural disaster coverage can cover your losses.

General Liability

There are several types of liability. The best known is the slip-and-fall accident, where you are responsible for a customer's bodily injuries. Other situations can result in liability for your business and lead to legal action. Potential liability includes:

  • customer slips on the floor in your market and breaks their ankle. Your business needs liability insurance to cover the personal injury suit and legal fees.
  • One of your salespersons has a social media page. They repost a joke on their site from a work computer that crudely mocks a competitor. The competitor sues you for defamation.

Workers' Compensation Insurance

If you have even one employee, you must have workers' comp. Every state except Texas requires workers' comp insurance. Texas recommends it for private companies. Workers' compensation covers employees who suffer a work-related injury or illness. Situations can include:

  • Your secretary needs physical therapy to correct their carpal tunnel syndrome. They require coverage for medical expenses and short-term disability coverage.
  • An employee picks up a client from the airport. A truck forces their car into a guardrail and both your employee and the client suffer injuries. Workers' comp will pay the employee's medical bills. Your commercial auto insurance will pay for the client's injuries.

Specialized Business Insurance Policies

Some businesses or professions need specialized insurance because of the nature of their industry. Doctors and attorneys must carry malpractice insurance in case of lawsuits. Directors' and officers' insurance covers the costs of lawsuits against corporate officers, separately from the company.

Other types of coverage you may need include:

  • Errors and omissions insurance: Also called professional liability insurance, this protects companies against inadvertent mistakes. Professional services like accounting companies often have this insurance to protect against accidental errors.
  • Retailers and wholesalers product liability insurance: When a product is defective, every business in the commerce stream bears some liability. Product liability insurance provides coverage in case of legal action.
  • Cyber liability insurance or data breach insurance: These help offset any liability claims that result from hacking or other data theft.

Types of Business Insurance Coverage

Because there are so many types of small business insurance policies, insurance companies make it easier by combining or bundling the most common insurance policies into a single package. Examples include:

  • A business owner's policy (BOP) combines general liability, commercial property, and business income insurance in a single policy. Business owners can get umbrella insurance to extend the policy limits if necessary.
  • Tenant's insurance may be needed when you lease rather than own a building. Commercial landlords often make this part of the lease.
  • Home-based business insurance can be added to a homeowners' insurance policy for coverage for equipment and liability.

Get Legal Advice

Insurance is essential for business purposes. Whether you're a startup or an established business, you must have appropriate insurance coverage. Speak to a business and commercial law attorney to discuss your insurance needs.

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