Types Of Business Insurance

By Author: Michelle Ferris
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No matter the size of your business, insurance is an important consideration. Many small businesses feel that paying insurance premiums will drain their cash flow and that the money is better spent funding marketing or operations projects. However, if you don't have adequate or any insurance and you suffer an unforeseen loss, it could severely affect your business's ability to generate income. The ideal scenario is to have an insurance policy that you can afford which provides you with an adequate level of insurance. To achieve this, you need to be informed of the types of business insurance available and decide which is best for your business.

Insurance for Business Owners

As a business owner, you are probably the vital driving force behind the business. It's therefore important to protect yourself, your family and your business by taking the appropriate insurance coverage. Health insurance is essential for business owners. An accident or illness can have a serious impact on a business if the owner is not able to work.

Disability insurance is equally important. For example, suppose you are in a motor vehicle ...
... accident and suffer from several broken bones. You may make a full recovery; however, it may be several months before you are back on your feet. It is not just the medical costs that need to be covered. Consider what will happen to the business in the interim if you are not there to run it? Select your disability policy carefully as some only cover you if you cannot work at all.

For business owners that have families and dependents, you should also consider life insurance. In the event of your death, at least your dependents will be financially taken care of. In a partnership, one person may be the financier and the other the key person in terms of operations. In this instance, you should consider looking into Key Person Insurance. It's different from life insurance in that it covers the business rather than the person's dependents in the event of the death of the key person.

Insurance for Business Operations

The insurance for different industries and types of business varies greatly. In most instances, businesses can tailor their policies so that their specific business insurance needs are met without having to pay for extraneous cover that is not needed by the business. We'll cover a few examples of the types of insurance that are generally issued to different types of businesses.

Most states legislate that any business that has employees, even if they are just part-time employees, provides workman's compensation. This insurance covers employees in the event of any work-related accidents.

General Liability Insurance covers the business against legal claims resulting from negligence, accidents or injuries. It applies to all forms of business from service and retail to manufacturing. In general, it covers the costs of legal defense attorneys as well as the settlement of any bonds or judgments against the business resulting from the claims.

Professional Liability Insurance is applicable to businesses that have a service offering. This type of insurance covers malpractice, errors or negligence in service delivery to clients. Professional Liability Insurance is legislated for medical professionals in most states.

Product Liability Insurance applies to manufacturing, wholesale, retail and product distribution businesses. This type of policy will cover the business if a defective product results in injury or bodily harm for a customer. The level of insurance will depend on the type of product that the business distributes or sells. A food manufacturing business will need far higher insurance cover than a business that manufactures socks, for instance.

Home-Based Business Insurance is different from a standard homeowner's policy in that it covers the commercial assets of your business, such as computers, if you are working from home. Often these are aspects that you can specify as part of your homeowner's policy or additions that you can make to it. They are not always automatically included so check your homeowner's policy carefully before making this assumption. Regardless of the way you choose to structure your policy, it's important to know that both your home and business assets are adequately covered.

Commercial Property Insurance covers all aspects related to physical damage that may occur to a business premises. This could be a fire, rain damage, computer network failure or even damage resulting from civil unrest and vandalism. There are two sub-categories of commercial property insurance. Peril-specific policies cover only circumstances specifically listed in the policy. All risks insurance covers a wide range of possible incidents. Most Commercial Property Insurance policies only have a peril-specific clause if there is perceived to be a higher-than-average risk in one particular area or type of incident.

Selecting Business Insurance

When considering business insurance, it's important to know your type of business, what possible risks it could be exposed to as well as any legal insurance requirements for your industry or state. Compare policies and quotes from a broad range of insurance companies before making your decision. Enlist the expertise of a broker if needed to help you find the policy most suited to your business.
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