The Basic Types Of Business Insurance
Running a business is an intrinsically risky prospect. Those who achieve success do so in large part by identifying and accommodating for any risks that exist. One of the most important ways of mitigating business risk is by purchasing the right business insurance. Many types of business insurance are available, covering many different hazards characteristic of many different industries. The following list covers some of the most common types of business insurance available.
Commercial Auto Insurance
Auto insurance is a necessity for any automobile owner – especially those who pay other people to drive the automobiles they own. If your company owns and operates automobiles, your company should invest in commercial auto insurance. In many places, you may actually be legally required to do so. This is because, if an incident occurs, your company may be liable to property losses as well as bodily injury to employees and anyone else involved. Such financial liabilities can sometimes run in the millions. To mitigate the chances of having to deal with such excessive financial burdens, you should make sure that you have insurance covering liability as well as medical expenses for your employees and repairs to your vehicles – regardless of fault.
Workers’ Compensation Insurance
Again, this type of business insurance is so important that it may even be a legal requirement where you are. Such insurance covers injuries sustained while on the job. For instance, if you have a roofing business and your employee falls and suffers a paralyzing back injury, a workers’ compensation insurance policy will probably make regular payments to that employee until he or she reaches retirement age. Such insurance will help to shield your business from the financial burdens of civil suits.
Whether you own it or rent it, your business probably has a specific piece of real estate property associated with it. Owning such a piece of property comes with a number of risks, and there are specific types of insurance policies that cover these risks. For example, if you own a storefront, you should invest in property insurance. This protects against things like vandalism and the theft of machinery and equipment. It also protects against things like flood and fire damage. If you are a commercial tenant, the property insurance policy will probably come under the property owner’s name, but you will usually be charged for it.
General Liability Insurance
As its name suggests, general liability insurance protects businesses against a broad range of liabilities. If your business is sued by customers, employees, associates, or other companies because of losses its operations cause, general liability insurance usually covers this. However, such policies can only cover compensatory damages: any punitive damages ordered by the court must still be directly paid by the business.
Product Liability Insurance
If your company manufactures and sells a product that turns out to have harmful effects, it will most likely face legal consequences. Such consequences may involve fines, civil suits, recalls, disposal or recycling costs, and a loss of inventory investment. Product insurance can cover the financial damages associated with such costs and losses.
Professional Liability Insurance
For certain professionals and businesses, the operations in which they engage are intrinsically sensitive. The slightest mistake could result in losses for clients – and those losses become the financial responsibility of the professional or business. For instance, accountants, investment brokers, and insurance agents handle transactions involving large sums of money and are privy to personal financial information. If they make mistakes in their paperwork or make sensitive information available to other parties, this can result in a civil suit. Professional liability insurance – sometimes called errors and omissions insurance – protects against such losses.
Business Interruption Insurance
Various events can interrupt a business’s ability to bring in revenue. The direct costs of such events are often covered by other insurance policies, such as property insurance. However, if your place of business is damaged by flooding, the resulting costs tend to extend beyond just the repairs. While the building is damaged and under repair, you are probably losing business. Business interruption insurance covers such losses, reimbursing the business for the time in which it is unable to carry out normal operations.
Home-Based Business Insurance
To save money, many new businesses are run from the home. Some people may believe that homeowner’s insurance protects against any business-related losses that occur in the home, but this is not the case. To have such coverage, home-based entrepreneurs usually need to purchase separate home-based business insurance policies.
An umbrella insurance policy for a business is designed to cover all losses not covered by other policies. For instance, if a flood results in $2 million in inventory losses but other insurance policies only cover inventory losses up to $1 million, an umbrella insurance policy would cover the remaining $1 million. The comprehensive nature of umbrella insurance policies makes them very useful, and they tend to be affordable. However, most umbrella insurance policies stipulate that you must purchase the maximum amount of coverage available in a collection of other policies.
While every business does not need every kind of insurance, most businesses do need some sort of business insurance to protect themselves against the risks associated with their operations. By combining the coverage of the applicable business-related insurance policies, you can help to ensure the long-term economic stability of your enterprise.