What Is Business Insurance?

Why Do I Need Business Insurance?

To Protect Your Financial Investment

You may have significant investments in inventory, equipment, and office space. Insurance takes care of potential losses so that the losses won’t bankrupt your business. For example, if a fire destroys your office and equipment, property insurance covers replacement and repair costs while business interruption insurance replaces lost business income.

To Protect Your Business

Many lawsuits against a business arise from injuries at your place of business or from a product you sell. Liability insurance covers claims from personal injury and property damage lawsuits. If someone were to sue you for injury from one of your products, business insurance covers the claim and legal fees of the lawsuit.

To Protect Professional Services

Most doctors or lawyers carry professional liability insurance to cover claims of malpractice or negligence. However, many other professionals benefit from professional liability insurance, such as:

• Healthcare professionals (doctors, surgeons, nurses, dentists, psychologists, and therapists)

• Legal practitioners (attorneys and paralegals)

• Financial professionals (accountants, financial advisors, and insurance brokers)

• IT and technology professionals (software developers, IT consultants, and web designers)

To Comply With the Law

You may be required to carry certain types of insurance for your business. For instance, in most states, you must have a Workers’ Compensation policy for employees. Workers’ Compensation provides medical expenses and lost wages for work-related injuries or illnesses.

To Have Peace of Mind

Running a business involves uncertainty and stress. Having business insurance lets you rest assured that if something goes wrong, your business operations can continue, and you won’t be financially devastated. You can focus on growing your business instead of worrying about potential threats.

What Business Insurance Do I Need?

Business owners should evaluate their insurance needs to be fully protected. Different types of business insurance may apply to your type of business. The following are the most common types of business insurance:

General Liability Insurance - Covers financial losses due to claims of personal injury or property damage.

Commercial Property Insurance - Covers business property, such as your buildings and equipment, from theft, vandalism, fire, or other natural disasters.

Business Interruption Insurance - Covers operating expenses and lost income and operating expenses if your business is halted temporarily due to a covered event.

Workers’ Compensation Insurance - Workers' Comp provides coverage to employees injured during their employment.

Professional Liability Insurance - Covers claims related to negligence, errors, or omissions in professional services.

Commercial Auto Insurance - Covers vehicles owned or leased by the business against vehicle-related accidents, damages, theft, and liabilities.

A business owner’s policy (BOP) typically combines general liability insurance, business interruption, and property insurance policies into one plan. Other types of business insurance include cybersecurity liability insurance in the event of a cyberattack or data breach and key person insurance to cover losses if a critical executive can’t work.

How Do I Compare Business Insurance Coverage and Quotes?

Small business owners should first identify their business's specific liabilities and understand how insurance can protect against those risks. For example, a boutique owner is more concerned with theft and property damage than a consultant who needs professional liability insurance. Then, they should shop around and compare coverage and costs.

1. Understand Coverage Limits and Deductibles: Coverage limits are the maximum amount an insurer will pay for a covered claim. A deductible is the amount you pay out of pocket before your insurance covers a claim. Determine what are realistic numbers for coverage limits and figure out a deductible that works with your budget.

2. Evaluate the Cost: You want to make sure you have enough coverage without paying too much. Premiums cost more if your coverage limits are high and your deductible is low. Find a quote that gives you adequate coverage at a good value.

3. Choose Reputable Business Insurance Providers: You may like your life insurance company, but there may be better providers of business insurance. Identify insurance companies with good reputations, solid financial situations, and responsive customer service. Some insurance companies specialize in serving niche businesses, so consider seeking recommendations from businesses similar to yours.

4. Read the Fine Print: Review the policy’s terms and conditions to ensure you understand what it covers and does not cover.

10 Questions To Ask About Business Insurance Policies

When exploring your options for business insurance, come equipped with the following questions to see if a policy is right for your business.

1. What does this policy cover?

2. What is the deductible?

3. What is the coverage limit?

4. What are the exclusions or limitations? Do I need additional coverage?

5. What is the premium (the business insurance cost)?

6. Are there any discounts?

7. What is the policy term?

8. Are there any additional fees?

9. Does this policy meet any federal or legal requirements necessary for my business?

10. Who do I contact? Do I have a dedicated insurance agent?

It is best to talk with insurance providers and get direct answers to your questions. They may also be helpful in crafting policies to address your business’s specific risks.

Protect Your Business and Focus on Growth

Business insurance protects your financial investment and ensures your business’s long-term success. Small business owners should assess their risks, compare types of coverage, and know what to ask insurance providers. Having the appropriate insurance gives business owners peace of mind and lets them focus on their business.

If you need help with insurance or liability claims or have questions about business insurance coverage, an experienced insurance law attorney can assist you.