Commercial Insurance Coverages You May Need
You are starting your own business. You need to protect your business. Well then you need business insurance and you have come here to find out more about what types you should purchase. That’s very smart and you are in the right place!
It is vital to your company to have the right types of insurance in place. Liability insurance won’t cover a worker getting burned by your machines. Workman’s comp won’t cover losses if your business gets broken into. Commercial auto won’t cover your business if you have a fire and lose half of your inventory. It is critical to have all of your bases covered. By going to USinsurance online, you will be connected to agents that know the right questions to ask to make sure you are fully covered. They understand things like limits, deductibles and all that other insurance jargon that is so hard to understand without help.
We have compiled a list of some of the most popular types of coverage available for the small business owner. We are not showing EVERY type of insurance, please speak with your agent for your specific needs. This guide only gives you some examples of some of the different types.
We must stress the importance of speaking to a live agent. As simple and fun as we try to make this for you, insurance is inherently complicated. It’s not something you can risk getting wrong and not being covered in a time of need.
Remember, you can request a FREE, no-obligation quote to compare your coverage options. There’s nothing for you to lose!
- Property Insurance: This protects what your business owns. Your office equipment, computers, documents, building, etc. It also covers losses such as fire, theft, vandalism, natural disasters, etc. It only protects what your company owns. It would NOT cover the building if say it burned down while you were renting it. That’s up to the building owner. (As long as you didn’t cause it of course) There are two types of property policies available. 1. All risk and 2. Peril specific policies. All risk is very broad in what it covers. Usually it excludes whatever may not be covered. Peril specific only covers what is named on the policy. It may provide coverage for something that is specifically excluded from all risk coverage.
- Small Business Liability Insurance -This is insurance that protects your business from damages you may cause to third parties such as customers. You will be protected when your business is found guilty of things such as bodily injury, property damage, libel, etc. Smaller companies will usually do just fine with this general coverage. However there will be companies that require additional, more specific coverage for issues not covered in their general policy.
- Home Based Business Insurance -You may not need a building for your business. You might run your company out of your home. This does NOT mean you don’t need coverage. Your homeowners policy normally will NOT cover you for business activities. Some policies allow for you to purchase a ‘rider’ to your homeowners policy, so that’s something to check into.
- Business Owners Insurance (BOP) -This is a very basic insurance. It typically covers the basics of what a small business would need such as basic property and liability coverage. This policy usually comes at a discount because it’s bundled together. If you are a very small organization, this could be all you need. Additional coverage types can be purchased to compliment this policy.
- Professional Liability Insurance – See Errors and Omissions Insurance below.
- Errors and Omissions Insurance -This protects you if you give any sort of professional advice or service where you could give bad information. This protects you against errors, negligence, poor advice, etc., when providing a service to customers. You may need this if you are an accountant, financial advisor or a computer programmer. (Computer programmer?? Yes, say you make an error in a client’s software that results in a loss, or downtime. This covers you.) In the medical world, this coverage is called medical malpractice.
- Product Liability Insurance -Do you sell products? If so, this insurance is for you. This offers protection against bodily harm or property damage that results from a defective product. If you have ANY part in getting a product to a customer, you need to be covered for this. The type of product that is being manufactured, distributed or sold will determine the amount of coverage you need. Say you sell cars- you will need more coverage than if you sold paper goods. The cost of coverage will be reflective of the amount of potential exposure.
- Workers Compensation Insurance
-Most businesses need this type of coverage if they have employees. The rules vary state by state. This coverage is called a ‘no-fault’ coverage. This means that regardless of who is responsible for the injuries, your employee can seek medical care and be compensated. In return, the employee is not allowed to sue you as a result of their injuries. Depending on the state, coverage may not be required.
- Employers Liability Insurance – Workers compensation insurance pays for the medical care and disability benefits for employees that are injured on the job. It doesn’t matter who was at fault. But, what happens when an employee is injured due to workplace conditions, rather than just a plain accident? Well, workers comp will still pay for medical coverage, but an employee, or their family, may seek additional damages. When you are sued by a third party because a worker was injured due to workplace conditions, employers liability covers you. This type of policy offers coverage when employees are injured, or become sick, due to workplace conditions. It is often times part of a workers comp package and may be a state requirement.
- Business Interruption Insurance – This insurance covers you if you cannot operate your business in the event of a covered loss. OR if the loss causes an earnings reduction. If you lose income after an event, it will cover the loss, minus the expenses you would have paid anyway. However, say you had to move your business to a new temporary location and the utilities are more expensive. The extra cost would be covered.
- Commercial Auto Insurance
This one is pretty straightforward. If you use a vehicle for business purposes, you need this. Your personal auto policy will not provide protection for business use of a vehicle, even if it’s your personal vehicle. Business auto insurance is tailored specifically to the needs of business operators.
- Directors and Officers Liability Insurance -If you have upper management (directors and officers) you may need protection. They may be held liable for their actions if they result in actual or perceived damages to a third party. This includes actions taken by management that results in a lower valuation of a company (i.e. stock price), or negligence while performing their duties. Competitors can also sue you if they feel that there are unfair business practices or anti-trust situations. This policy can protect the directors and officers of both publicly held companies, as well as privately owned businesses. Because of the potential for a person holding an upper management position to be sued for their actions, directors and officers insurance is often times used to entice, and keep the best talent. The policy is usually purchased by the company itself, but it benefits the directors and officers that run the business.
- Contractor Liability Insurance– Contractor liability insurance is generally considered to be coverage for companies or individuals in the construction business. Its not for independent contractors that hire out their talents to different companies. As such, contractors insurance can include liability and property coverage. It can be specifically tailored to those in the construction field. It can also include bonds that many contractors are required to have before they are allowed to bid on a project.
- Surety Bond– Surety bonds are used to guarantee the performance of an individual or company. For example, a general construction contractor may use a surety bond to show that they will finish a remodeling job. Or, a professional may use surety insurance as a way to ensure they will fulfill their contractual obligation. This basically gives the customer the peace of mind that the job will be completed. This insurance will financially compensate the customer for the work not completed. Or, it will give the customer the money to have someone else finish the job. It is a reassurance tool so that companies or individuals feel comfortable entering into a contract with the service provider.
- Fidelity Bond Insurance – With employees, there is the potential to have a few bad apples who might do something dishonest. A fidelity bond guards against employee dishonesty, much like a property policy guards against damage to a physical structure. In the case that an employee causes financial harm to your business, the fidelity bond will cover the loss. This is especially important coverage if your employees are in a position to steal directly from the company itself. Not to mention from your clients.
- Key Man Coverage – Key person insurance compensates your company should the named insured die or become incapacitated and unable to perform their duties. Such a policy is usually taken out against a person who is vital to the success of your operation. Such a policy is intended to compensate your company for the costs associated with finding a suitable replacement. Or, to train a suitable replacement.
- Small Business Health Insurance-
Whether your company has 1 or 100 employees, health insurance coverage is a factor. This coverage can be an individual policy that covers just yourself, or a group plan for multiple employees. The number, and type, of eligible employees will determine the coverage that should be purchased. For example, a one-person operation will not be eligible for group coverage purchased through the company. Because there is no group to cover, they would need to purchase an individual plan. However, a company that employs multiple people (other than immediate family members) may consider offering a group health plan as an employee benefit that is much appreciated and much sought after.
Additional Insurance Coverages
Additional insurance coverages an entrepreneur might need are found below. While these are not traditional, commercial coverages, they do represent important policies a business owner should consider for the financial well-being of their families.
- Disability Insurance – Disability insurance can provide money if the policy holder is unable to work due to a sickness or injury that leaves them disabled. There are different types of disability coverage, including short-term disability and long-term disability, that will pay out for a specified amount of time, or after the insured is out of commission for a certain time period. If a family relies on an individual to be working, then disability insurance can provide a source of income should something happen where that individual is unable to work on a permanent, or temporary, basis.
- Life Insurance – If someone other than yourself depends on your income to survive, consider purchasing life insurance. This type of policy pays the amount specified on the policy upon the death of the named insured and can allow survivors to continue the lifestyle they are accustomed to. There are different types of life insurance including term, whole and universal life insurance, each with their own advantages and disadvantages. Consider a life policy if your family would be at a financial disadvantage if you suddenly died. This is especially important coverage for an entrepreneur that is yet to build up a large enough nest egg for their family to survive on should something tragic happen.