Types of Insurance Policies for Small Businesses
Your business takes risks, and protecting it from financial loss requires the right policies. Here are eight types of insurance you should consider for your company.
Commercial property insurance protects your physical assets from things like fire, theft, and natural disaster damage. It also covers equipment, inventory, and furniture. It can be bundled into a business owner’s policy (BOP).
General liability insurance pays for legal costs and settlements that may arise from customer or client claims of property damage or bodily injury. Lenders, landlords, and licensing boards often require this coverage.
- General Liability Insurance
Running a business is fraught with risks. Liability claims aren’t uncommon and can be very expensive. Recent research indicates that four out of 10 small businesses will experience a liability claim in the next ten years. Without adequate funds, these expenses can wipe out a company. This is why it’s important to protect yourself with general liability insurance.
GLI policies cover a wide range of liabilities, including bodily injury, property damage, personal and advertising injury, and medical payments. Some insurers even offer business interruption coverage. These policies are also a requirement for most commercial leases and contracts.
The best way to determine a proper policy is to sit down with a reputable agent. They can help you assess your specific business risks and liabilities to develop a plan that is tailored to your needs. They can also guide you through the claims process to minimize financial losses and disruptions to your operations. They can even provide you with a list of top-rated insurance companies that provide this type of coverage.
- Commercial Property Insurance
Commercial property insurance is a type of small business insurance that protects your physical assets from damage or loss. Depending on the policy, this could include the building your company uses, your inventory, equipment, computers, and more. It can cover the cost to repair or replace these items if they are damaged by fire, storms, theft, or other hazards. This is a crucial type of small business insurance to consider for any company that owns its building or has expensive physical assets.
You can get commercial property insurance separately or as part of a larger package called a business owner’s policy (BOP). The BOP includes general liability, property, and loss of income insurance. It’s a good idea to shop around for commercial property insurance quotes to find the best rate and coverage.
Remember that the premium you pay for this type of small business insurance is based on how much risk your company faces. For example, a manufacturing company that works with expensive industrial equipment and has many employees will pay more for property insurance than a restaurant that only operates out of a small storefront.
- Business Income Insurance
Oftentimes, unforeseen events like fires and severe weather can shut down your company, leading to lost revenue and extra expenses. Business interruption insurance, also known as business income coverage or BIC, can help offset these losses by providing funds to cover expenses while your company is closed for property repairs and restoration.
This type of coverage can be added to your commercial property policy or bundled into a package policy called a business owner’s policy (BOP). It covers the financial impact of a period when your business is suspended because of direct physical loss or damage from a covered peril at the described premises. This includes costs incurred while operating out of temporary space, loan payments, or lease payments for equipment.
A typical business income policy will have a restoration period and a maximum limit for extra expense coverage. Some policies offer an agreed value option in which financial information and projections are submitted each year to determine the amount of coverage. This method can save you time and hassle and eliminates the need for coinsurance penalties to be applied to claims.
- Professional Liability Insurance
As an insurance producer, your job is to help small business owners understand the risks that could financially damage their companies and recommend the right coverages to protect them. While general liability is a foundational policy for any company, many other types of business insurance can help small enterprises mitigate various types of risk.
For example, professional liability insurance (also known as errors and omissions insurance or E&O) helps companies cover legal costs and settlement costs related to service-related mistakes and oversights. It’s a common choice for consulting, insurance, and financial services companies, among others.
The types of risks that a business faces will vary depending on the industry, so each policy will be tailored to meet the specific needs of each company. For example, a building contractor who works with heavy equipment and dangerous machinery will likely need to invest in more comprehensive commercial property insurance than an accountant who works behind a desk. In addition, many insurance providers offer bundled packages, such as the business owner policy (BOP), that bundle general liability and property insurance for small businesses at a more cost-effective rate.
- Workers’ Compensation Insurance
Workers’ compensation insurance is a policy that pays for medical expenses and some portion of lost wages when employees are injured on the job. In addition, this type of coverage usually pays funeral expenses for employees who die from work-related injuries or illnesses. It is typically mandatory in most states for employers to have this insurance.
Some small business owners avoid taking out this type of coverage because they believe it is expensive and will add to their overhead costs. However, the cost of paying out a claim for a serious workplace injury can be far more than any annual premium a workers’ comp policy might cost.
Many insurance agents and brokers can help you find customized workers’ compensation coverage. This type of policy is often more affordable because it allows you to pay for insurance based on your actual payroll instead of an estimated number. In addition, some insurers offer a “pay-as-you-go” option that lets you adjust your coverage to match the size of your workforce in real-time.
- Data Breach Insurance
When a business suffers a data breach, it can cause major damage. Hackers are a common cause of data breaches, but human error or malware could also be to blame. Data breach coverage helps cover the costs of responding to and cleaning up cyber-attacks.
A standard policy will include a per-occurrence limit and an aggregate limit for the amount of data that can be breached. It can also cover the cost of notifying customers, credit monitoring services, and fines that may be levied by regulatory bodies. Some policies offer monetary assistance for public relations and crisis management to repair a company’s reputation after the breach.
Some insurance companies that offer cybersecurity coverage also sell data breach protection, including Chubb’s Three small-business insurance and Berkshire Hathaway’s cyber ERM policy. A policy like Three offers a single, all-inclusive package that can save businesses the hassle of managing multiple policies. It includes liability, business interruption, and commercial auto insurance as well as a range of coverages to protect against cyber risks. However, it does not provide third-party coverage, which requires an additional policy.
- Commercial Umbrella Insurance
A commercial umbrella insurance policy is a type of liability coverage that provides an additional layer of protection over the policies your business already has in place. It is typically purchased to cover damages or losses that exceed the limit of your existing policy, and it can help you avoid expensive out-of-pocket expenses in the event of a catastrophic liability loss.
Umbrella policies can be especially helpful for businesses that regularly work on customers’ property, such as delivery services or manufacturers. These types of companies are at a greater risk for third-party injury and property damage than businesses that operate exclusively in-house. Additionally, a company that has been involved in a lawsuit where a large award was given may need to consider an umbrella policy to help offset the cost of high verdicts and settlements.
No matter how much effort a business puts into prevention, accidents can still happen. Having enough liability protection in place will give business owners peace of mind and may even be required by certain contracts.
- Commercial Auto Insurance
Commercial auto insurance, also known as business auto or fleet insurance, is a type of car coverage that provides financial protection for any NY vehicles that you and your employees use for work purposes. Commercial vehicle policies differ from personal auto insurance in terms of eligibility, coverages, deductibles, and rates.
Generally, a commercial auto policy covers vehicles that your company owns, leases, or hires and provides liability insurance for bodily injury and property damage caused by accidents while on business. It may also include medical payments and uninsured/underinsured motorist coverage. It is common for commercial auto policies to provide a variety of optional coverages as well, such as auto loan/lease gap coverage, rental reimbursement, new vehicle replacement, and more.
Like other types of business insurance, commercial auto policies can vary greatly in cost and coverage depending on several factors, including the driving records of your drivers, the type of vehicles you own/lease/hire, any safety programs you implement or have, the number of claims you file and more. It’s a good idea to work with a licensed insurance agent/broker who can help evaluate your business needs and recommend the best options for you.