What Is Small Business Insurance?
Whether you’re in the retail, construction or financial services industry, most small business owners need small business insurance. Having it can help protect the livelihood you’ve worked so hard to build. The right small business coverage can help cover expensive damage and lawsuits from:
Types of Small Business Insurance
General liability insurance
General liability Small Business insurance can help protect your business from bodily injury or property damage claims. They can also help cover defamation and slander claims.
For example, if a customer slips and falls while shopping in your store, this coverage can help pay for their medical bills. Without it, you will have to pay these costs out of pocket.
Commercial property Small Business insurance
Commercial property small Business insurance helps protect the physical location of your business and other property, such as your:
- Tools
- Equipment
- Inventory
- Furniture
For example, if a fire damages your office building, this coverage can help replace your equipment inside.
Small Business Insurance Basics
Nsurers often bundle a number of Small Business insurance coverages into one package that is sold as a single contract. The most common policy for small businesses is the Business Owners Policy (BOP).
BOP combines coverage for all major property and liability insurance risks as well as several additional coverages into one package policy suitable for most small businesses. The term “BOP” refers to insurance policy language specifically developed (and revised as needed) by ISO’s experts. ISO provides insurance companies with sample insurance policy language, research, and various other products.
BOP includes business income insurance, sometimes called business interruption Small Business insurance. This compensates the business owner for lost income after a disaster. Disasters typically disrupt operations and can force a business to evacuate its premises. Business income insurance also covers additional expenses that may be incurred if a business is operated out of a temporary location.
A variety of additional coverages can be added to the basic BOP to cover specific risks associated with the business. For example, if a business has an outdoor sign, the BOP does not cover it unless coverage is specifically added for an additional premium. If a business relies on electronic commerce, the owner can add coverage for lost revenue and additional expenses in the event that a computer virus or hacker slows or stops the business’ ability to conduct e-commerce.
Only small to medium-sized businesses that meet certain criteria are eligible for BOP. Factors that insurers consider include the size of the premises, the required limit of liability, the type of business and the extent of offsite activity. The premium for a BOP policy depends on those factors besides the location of the business, financial stability, building construction, security features and fire risks.
Major Coverages
Most small businesses need to purchase at least the following four types of insurance.
1. Property insurance
Property Small Business insurance compensates a business if property used in the business is lost or damaged as a result of a variety of common perils such as fire or theft. Property insurance covers not only the building or structure but also what insurers refer to as personal property, i.e. office furnishings, inventory, raw materials, machinery, computers and other items critical to business operations. Depending on the type of policy, property insurance may include coverage for equipment breakdowns, debris removal after a fire or other catastrophic event, some types of water damage, and other damages.
2. Liability Insurance
Any enterprise can be sued. Customers can claim that a business has harmed them as a result of, for example, a defective product, service error or neglect of another person’s property. Or the claimant may allege that the business created a dangerous environment. Liability insurance pays damages for which the business is found liable, up to policy limits, as well as attorneys’ fees and other legal defense costs. It also pays the medical bills of anyone injured by the business or on its premises.
3. Business auto insurance
A business auto policy provides coverage for business-owned autos. The Small Business insurance pays any expenses resulting from bodily injury or property damage to third parties for which the business is legally liable, up to the policy limit.
4. Workers’ compensation insurance
All states except Texas require employers to have workers’ compensation insurance when there are more than a certain number of employees, which vary from three to five depending on the state. Workers’ comp insurance, as this coverage is commonly called, pays for medical care and replaces a portion of lost wages for an employee injured during employment, regardless of who was at fault for the injury.
When a worker dies due to an injury while working, the insurance provides compensation to the worker’s family. An extremely small business, such as a business operated by one or two people outside the home, may not need workers’ compensation insurance. But it often requires more property and liability insurance than is offered in a typical homeowner’s policy.
Other types of business coverage
1. Errors and Omissions Insurance/Professional Liability
Some professions involve services such as giving advice, making recommendations, designing things, providing physical care, or representing the needs of others, which may cause customers, clients, or patients to claim that they have been injured by the profession’s failure to act properly. . . Errors and omissions or professional liability insurance covers these situations. Any judgment for which the insured is legally liable will be paid up to the policy limit. It also provides for legal defense costs, even if there is no wrongdoing.
2. Employment Practices Liability Insurance
Employment practices liability insurance covers (up to policy limits) damages for which the employer is legally liable such as violations of an employee’s civil or other legal rights. In addition to paying the judgment for which the insured is liable, it also provides for legal defense costs, which can be substantial even when no wrongdoing has occurred.
3. Directors’ and Officers’ Liability Insurance
Directors and officers liability insurance protects directors and officers of corporations or non-profit organizations if it is claimed that they are managing the business or organization without regard for the rights of others. Any judgment for which the insured is legally liable will be paid up to the policy limit. It also provides for legal defense costs, even if there has been no wrongdoing.
4. Key Personnel Insurance
Life or disability income insurance can compensate a business when certain key employees die or become disabled. This coverage eliminates some of the adverse financial impact that results from the loss of key employee participation.
5. Umbrella policies
As the name suggests, an umbrella liability policy provides coverage over and above the business’s other liability coverage. It is designed to protect against unusually high losses. It provides protection when the policy limits of one of the underlying policies are used.
For a general business, an umbrella policy will provide protection beyond general liability and auto liability policies. If a company has employment practices liability insurance, directors and officers liability, or other types of liability insurance, an umbrella may provide protection beyond those policy limits.
Other Types of Small Business Insurance
Here are some additional types of insurance you may need for a small business.
Directors and Officers (D&O) Insurance. This type of liability insurance policy covers the decisions taken by the directors and officers and board members of the company. If they are sued, D&O insurance can pay for their legal expenses. For example, directors and officers may be sued by employees, vendors, investors or customers for alleged wrongdoing in the management of the company.
Inland Marine Insurance. Inland marine Small Business insurance covers products and materials and equipment that are transported over land by truck or train. It will pay for damaged, lost or stolen property.
Product liability insurance. Product liability Small Business insurance covers claims and lawsuits that cause injury or property damage to a company’s products. If you produce, this is a good insurance protection.
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