As a small business owner, you’ve put in tons of time and hard work to ensure your company thrives. However, are you doing everything you can to protect your business and livelihood from unnecessary risk? While you can be as careful as possible, it isn’t always feasible to keep accidents or lawsuits from happening.
That’s where business insurance comes in, but not everyone knows what this is or the merits of why it is just so important. Thankfully, we’ve put together this article to help you out. Here is a brief guide on how commercial insurance works and why you need it for your small business.
Understanding the Basics of Business Insurance
Before we can discuss why you need business insurance, it is important to understand the basics.
When it all comes down to it, business insurance isn’t really that different from the home and auto insurance you already carry on your personal assets. Both commercial and personal lines policies include filling out an application with details of your needs, choosing coverage, selecting a deductible, and paying a premium.
The biggest difference with business insurance, however, is that it is designed to cover situations and items relating directly to your company. Sounds simple enough, right? Well, sometimes things can get a little more complicated, which is what we cover in the rest of this article.
What Does Business Insurance Cover?
So, let’s get right down to it. The biggest question that most people have when it comes to business insurance is what it covers. The answer? Everything. This is actually fairly simple to think about, but here are a few examples to help you understand:
- Property owned by your company, ranging from a building you own to tools, vehicles, computers, and the stockpile of customized pens sitting in your supply closet.
- Your company itself against unnecessary or frivolous liability claims.
- Your health, safety, and financial needs of employees if they are injured while on the job.
- Even more essential elements of your business including your ability to operate, reputation, and financial needs.
Of course, these are just broad range topics of what individual types of insurance policies actually cover. To look a little deeper, keep reading.
Most Common Types of Business Insurance Available
There are literally dozens upon dozens of different types of insurance policies you can purchase for your business. Essentially, if your company owns or employs it, there’s a specific type of coverage out there for protecting it.
However, it is important to realize that there are a few commercial policy types that are more common than others. A few examples of insurance for businesses include:
- General Liability Coverage: Usually just referred to as liability insurance, this type of policy protects your business against claims placed against it. This can be an injury, damage to someone else’s property, or even a data breach if you collect certain types of customer information on a regular basis. Essentially, it protects you from situations where someone is seeking monetary relief for damages caused by your business or employees, including the cost to hire an attorney if someone tries to sue you.
- Business Property Coverage: With this type of small business insurance coverage, you receive protection for physical assets owned by your company. Business property policies often include any owned buildings, supplies, tools, computers, and more against perils like storms, theft, fire, and vandalism.
- Professional Liability Coverage: If your business is in a certain high-risk industry, such as medical or law, you’ll want professional liability coverage. This type of policy helps increase your liability protection against incidents that happen during the performance of your professional duties. For some industries, it is a requirement for licensing.
- Worker’s Compensation Coverage: Required by law, worker’s compensation insurance protects your staff if they are injured while on the job and unable to work. In extreme circumstances, this type of policy also covers a certain level of death benefit to the employee’s loved ones.
- Commercial Auto Coverage: Business auto insurance is essentially the same as personal auto insurance, but the biggest difference is that the vehicle is owned by your company. If you have a fleet or employees who drive business autos, this type of policy is crucial.
- Business Owner’s Package Policy: This is a unique hybrid policy that combines general liability coverage and business property coverage together in one simple policy. For most small businesses, this is adequate protection and needs no additional coverage.
The actual type of business insurance you purchase generally depends on the specific industry your company is in. For example, a small retail store probably doesn’t need anything more than a basic Business Owner’s Package (BOP) policy. However, a law firm with thirty employees needs to tack on worker’s compensation coverage plus a professional liability policy.
See where we are going here? The more risk you have, the greater the need for multiple types of coverage as part of your business insurance plan.
The Role of Business Insurance for Most Companies
So, what’s the role of commercial business insurance for most companies? In reality, it is a protection mechanism. Accidents happen all the time even when your team is exceptionally careful. By building a relationship with a trusted commercial insurance agency in your area, you can rest assure that everything will be okay if there’s ever an incident.
Furthermore, business insurance also sometimes plays a major role in helping you land projects and jobs in your industry. For example, many construction companies must show proof of insurance before bidding on certain large building or remodeling contracts. Likewise, those who work with municipalities or the federal government must show that they have some sort of professional liability coverage, especially if they are involved with software or data security.
Conclusion – Insurance for Small Business Owners
You’ve worked hard to grow your company to the thriving enterprise that it is today. Buying insurance for your small business is an excellent way to ensure you’re consistently protected against the unknown. By taking the initiative and working with a trusted insurance agent to find the best business insurance now, you can rest assured that you have what you need if there’s ever an accident or someone files an expensive claim or lawsuit against your business.
Author Bio:
Selective Insurance is the 41st largest U.S. property & casualty group, providing Commercial, Personal, and E&S Lines coverage throughout their footprint, and Flood coverage through the NFIP in all 50 states.
Selective works with independent agents to understand the unique needs of each Small Business customer, and offer them the opportunity to Be Uniquely Insured.
