Many business owners who are new to the game do not realize the critical role that business insurance plays until it is too late. Businesses, like all entities, need protection. This is especially true for businesses that cater to customer or client needs by providing them with goods and services, which is, essentially what all types of businesses do. So, what exactly is business insurance and which type is best for which business? According to Smart Business Insurance, there are a number of types of insurance a business should consider, depending upon their industry and risk. Here is a look at the more common types:
What is Business Insurance?
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Business insurance is a type of insurance coverage designed to protect a business from losses that result from issues that might require the business owner to pay. These issues may include:
- accidents
- theft
- on-the-job injury
- negligence
- defective product or service
- property, equipment, or inventory damage
- employee illnesses and injuries
- loss of income
- lawsuits
- vandalism
Why Do I Need a Business Insurance?
The main purpose of having business insurance is to provide your business with protection so you will be able to cover costs that your business might incur in case of damages or claims. In case a business does not have insurance and a claim is filed for which the business entity must pay, it is the owner’s responsibility to pay the damages out of his/her own pocket. The problem with this scenario is that some claims and damages are very costly and could mean a serious financial setback for the business.
If you are a small business owner, you have to consider your business needs carefully to avoid exposing your personal finances in case your business suffers from a loss or a lawsuit. Furthermore, there are states that require businesses to carry specific types of insurance to operate legally.
Types of Business Insurance
General Liability Insurance
Sometimes known as commercial general liability or business liability coverage, this type of business insurance offers protection in case of property damage or bodily injury. It covers medical costs, advertising injuries, vehicle accidents, fire damage, and reputational harm.
Who Needs It?
GLI is recommended for most types of businesses, especially small businesses.
Vehicle Insurance
Vehicle insurance provides protection for company vehicles in case of an accident or injury.
Who Needs It?
Businesses that utilize cars and other vehicles for conducting business, such as those involved in deliveries, moving, transportation, and manufacturing. Businesses whose personnel also use cars owned by the company should also be insured. If the employee uses his/her own car, his/her insurance policy should provide coverage.
Property Insurance
This type of business insurance protects property used for business operations, including building, equipment, furniture, and inventory. Property insurance provides compensation in case of theft, or damage from a fire or storm. In general, however, it might not provide coverage for damage due to events such as earthquakes or floods.
Who Needs It?
Businesses that own the building, land, equipment, furniture, inventory, or signage used for operations.
Professional Liability Insurance
This type of insurance provides protection against negligence claims. These claims are usually filed by clients or customers if the provider of the professional service made a mistake, fails to perform as agreed, or was negligent. Professional liability insurance differs from one industry to the next, which means it is important to understand to which industry you belong to obtain the best coverage.
Who Needs It?
Professional liability coverage is best for professionals, such as architects, engineers, auditors, accountants, real estate agents, consultants, and insurance professionals, among others.
Product Liability Insurance
Businesses that produce or manufacture consumer products should consider buying product liability coverage. Any damages or illnesses caused by a product may be cause for a claim or lawsuit. A product liability coverage will help protect the business from these claims.
Who Needs It?
Manufacturers and producers of products, including consumer goods and equipment.
Workers’ Compensation Insurance
Businesses that have employees are required to have workers’ compensation insurance by the state. This type of business insurance provides compensation for employees in case of an illness or work-related injury.
Who Needs It?
Any business that hires employees will need workers’ compensation insurance as a way to provide compensation to injured or sick employees.
What If I Have a Home-Based Business?
A home-based business can still benefit from insurance coverage. Many home-based business owners rely on their home and/or personal insurance for protection. However, these may not suffice in protecting other components of the business, such as inventory and equipment. A home-based business should also consider insurance if it is used to meet clients or customers, or if it employs at least one other individual. Since the business is likely going to rely on the physical structure of the home, its operations could be affected severely should the home become damaged.
What Types of Home-Based Business Coverage Should I Look At?
There are different types of solutions you can consider for your home-based business, depending on the kind of business you run and on the type of products and/or services you offer. Some of the types of insurance you might want to look at include:
Business Owner’s Policy
-Provides protection for the home or property from which your home business is run. Should the home suffer from damage, this policy will also provide compensation for loss of income or inventory damage. This type of coverage provides protection for liability as well.
Business Owner’s Policy With Endowments
-This type of business insurance allows you to customize your policy. This is especially helpful if your business involves storing your clients’ personal information. You should also consider this coverage if your business will suffer from loss of income if utility services are interrupted.
General Liability Insurance
-This type of insurance covers your business from any type of claim or lawsuit, including personal injury, negligence, and faulty product. If a client, customer, or product end-user suffers from illness or injury from using your product or service, you can be covered by general liability insurance. Recently I come across an article pointing the same and the llc in California really supporting this at its best.
There are also certain aspects of home insurance that may be nullified if the home was used for certain business activities that the insurance company may not approve of. Some types of home-based businesses, for example, could put the home at risk, especially if it is being used as a place to produce goods. To be on the safe side, it is best to consult with an insurance professional to determine which type of coverage is best for you.
