By Brittany Cotton
Insuring your business is essential to protect your assets and livelihood. Although we would like to believe that our diligence will prevent the need for filing an insurance claim, the reality is that anything can happen. Furthermore, professional trades are required by law to carry business insurance. Highly-skilled labor has a lot of variables, and a lot can go wrong.
What Are the Different Types of Business Insurance?
Business insurance is particularized for the needs of individual businesses. No two businesses are alike. Every business can obtain a custom quote based on numerous factors. Generally speaking, there are different types of business insurance policies:
General Liability Insurance provides protection from tort and negligence claims filed by third parties for injuries, including bodily harm and damage to their property. These injuries can also include defamation and intellectual property infringement.
Commercial Property Insurance is similar to homeowner’s insurance. It protects the brick-and-mortar structures of the business and any property or inventory stored within them. This insurance typically covers any damage caused by vandals, inclement weather, fires, and theft.
Business Interruption Insurance protects businesses from the toll of being unable to operate for a prolonged period of time. Sometimes critical repairs are needed that can freeze a business. When you purchase interruption insurance, you can cover the costs you’d normally be paying out, such as taxes, debt obligations, payroll, and possibly for temporary relocation.
Professional Liability Insurance protects professionals from lawsuits for negligence if they fail to exercise ordinary care in the practice of their services. Doctors and lawyers are often required to carry malpractice insurance.
Workers Compensation Insurance is generally required by law to protect employees from the financial losses caused by injury and illness. By accepting workers comp at the time of hiring, the employee will then be barred from filing a lawsuit.
Commercial Umbrella Insurance is ideal for small businesses that are unlikely to make a claim but would like extra protection on a number of underlying policies if they do need to file a claim. This type of policy will cover additional damages when the underlying policy is exhausted and reduces the need to carry the maximum coverage on all policies at one time.
Commercial Auto Insurance is necessary if you use vehicles for deliveries, house calls, or any significant aspect of your business. Personal auto insurance may not cover accidents that occur during the course of business.
Cyber Liability Insurance is vital if your business handles any sensitive data of customers or other businesses. In the event of a cybersecurity breach, the insurance can be used to mitigate any injuries to the respective parties. Those affected by the breach can obtain notice, credit report monitoring, and compensation for collateral injuries.
Product Liability Insurance is necessary if your company produces products by which individuals may be injured. Defective products that cause illness or injury can lead to lawsuits. This type of insurance is designed to settle the claims if necessary.
What is the Best Type of Small Business Insurance?
Startup businesses and smaller businesses often require inexpensive insurance that provides coverage over a broad range of issues. They will typically buy something that is called a Business Owners Policy (BOP). The BOP will include general liability, business interruption, and commercial property insurance. The average policy costs less than $60 a month by bundling these essential policies together.
A variety of factors can affect the price of the policies, however. Businesses that are considered high-risk because of professional services, a larger volume of employees, and statistical probabilities that make the chance of filing a claim higher will obviously pay more.
The age and condition of equipment and buildings will also affect the price. Insuring older buildings with potential structural issues or equipment that can break down at any time can have a dramatic impact on the price. In addition to these factors, a history of filing claims may increase costs based on an individual’s statistical probability rating.
What Else Should First-Time Business Owners Know?
The chief goal of running a business is profit. If you have a passion for something, that may not translate into generating high profits. A business model that isn’t delivering explosive growth inevitably will begin shrinking as time takes a toll on the weaknesses.
The most successful startups find a niche to fill where they control a virtual monopoly on in-demand services or products in a locality, county, state, or nation. Competition is the biggest problem for most new businesses who are failing to deliver anything considerably different from the established businesses.
Brittany Cotton is a writer who focuses on health, wellness, and a variety of other topics. In her free time, you can find her reading, trying new recipes, or playing with her dog.