Your business is one of the most valuable possessions you own. Why put it at risk? Business insurance makes sure that you and the business you’ve built don’t suffer when the unexpected happens.
Insurance Every Business Should Have
No matter what size your business is, there are some basic types of business insurance you should have.
1. Property insurance protects your business property, including buildings and everything in them. Similar to homeowners insurance, business property insurance covers your equipment, furniture and inventory. This type of insurance is often required for bank financing, but even if it’s not you should have it to protect your investment. Be sure to go over your policy carefully, however. Not all risks are covered in basic policies, and damage from earthquakes, water and utility problems may require a special rider.
2. Liability insurance covers your business in the event that someone is injured on your premises or incurs damages because of your company. If, for example, a supplier gets hurt while delivering inventory to your business, general liability will typically cover up to $1 million per claim. Without liability insurance, your business could take a big financial hit if you are sued.
3. Worker’s compensation covers medical expenses, rehabilitation and lost income for employee injuries suffered on the job. It also pays death benefits for work-related accidents. Depending on which state you do business in, it may be required by law once you have a certain number of employees. If you have any employees, however, it’s wise to have this coverage whether it’s required or not. Work accidents are common and can bankrupt a business if it’s not covered. Here’s a tip: Cover yourself as well. It costs practically nothing to add an owner to a worker’s compensation policy.
You can often save significantly on premiums by buying policies that lump property insurance, liability insurance and other kinds of coverage together. These are called business owner’s policies.
Other Insurance You Might Need
Not all small businesses are exposed to enough risk to justify multiple insurance policies, but here are some other types of business insurance available.
1. Business interruption insurance helps your business get through a period where it’s impossible for you to do business. It covers lost income and pays normal business expenses as well as expenses needed to get you back to in the market. Whether it’s a fire, a natural disaster like Hurricane Katrina or something else, a business interruption policy can save your business from going under while you rebuild. These policies can vary, however, and you’ll need to read the fine print to know when coverage kicks in.
2. Business vehicle insurance covers vehicles owned and/or operated by your business. You should have this insurance if you or your employees drive a company vehicle or use personal vehicles for work. Personal auto insurance will not protect your business if an accident occurs while driving on company time.
3. Employment practice liability insurance protects the company against damages awarded through employment lawsuits and legal costs. Sexual harassment suits and other employment suits are more common than ever, and good conduct isn’t always enough to prevent them. These policies are dirt cheap, but could save you big on the off chance you need it.
4. Errors and omissions insurance is liability insurance for a service provided. This protects your business if the service you provide (giving expert advice, for example) causes damages. This is also called professional liability insurance.
5. Key man insurance is typically only necessary for small businesses that are partnerships or have one or more employees that are invaluable to the company. This can be either a death or disability insurance. If a partner dies, this insurance can be used to buy out the surviving heirs.
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