Business Insurance – Different Types of Policies
There are several types of business insurance available on the insurance market today. To adequately protect your business, you will likely need a combination of multiple insurance policies. It is also highly recommended that you speak to an insurance expert to identify the specific policies necessary for your company. However, these are some primary types of business insurance that most small businesses will need.
Business owners policy:
A BOP is usually a combination of general liability coverage. (e.g., bodily injury, property damage, personal or advertising injury, medical payments, products-completed operations, and damages to premises rented) and property insurance. You can also add an employment practices liability insurance (EPLI) policy to your BOP to cover your employees.
Business interruption insurance:
Also known as business income insurance, this is one of the most common types of business insurance. It helps you recover lost income and pay operating expenses (e.g., mortgage, rent, payroll, loan payments, taxes) if your business is forced to shut down because of disasters like a fire, flood, theft or collapsed building. It can sometimes be bundled with your BOP.
Management liability insurance:
Another comprehensive insurance package you may need is management liability insurance. This often combines insurance coverage like employment practices liability (essential protection for businesses with employees), fiduciary liability, and directors and officers (D&O) liability (essential protection for businesses with a board of directors).
Workers’ compensation insurance:
If an employee suffers an at work, workers’ compensation can cover their medical costs or lost wages. Workers’ compensation and disability insurance are often mandatory by law.
Errors and omissions (E&O) insurance:
If you offer professional services, you will want to acquire E&O insurance, also known as professional liability insurance. This type of coverage protects you in the event that a customer or client claims your services caused them financial distress. This is especially important for consultants and financial advisors.
Product liability insurance:
Small businesses often need product liability insurance to protect themselves against product-related claims. If your product causes damage or injury to a third party, or your company faces a product-related lawsuit, product liability insurance can help cover your protection and security.
If you or your employees use vehicles for business purposes, you will need some form of vehicle insurance. Whether you need personal or commercial auto insurance depends on the type of vehicles you use, what you use them for, and how much coverage you need.
Every small business owner should protect their data and technology with cyber insurance. If your business technology is hacked or data is leaked, cyber insurance (data breach insurance or cyber liability insurance) can help cover the costs of the damage.
These are just a few of the common types of insurance small business owners should consider. You should seek professional assistance to find the coverage that best protects your specific business.
How to Determine What Type of Business Insurance You Need
The best insurance for your company depends on your unique needs. To determine what types of insurance you need, you will have to undergo a careful analysis of your business. Paying an insurance expert is usually the best method find the right combination of coverage to keep your business legally compliant and financially protected.
Follow these four steps to determine what insurance your business needs.
1. Analyse your legal responsibilities and business assets.
First and foremost, you should do a careful evaluation of your business assets. By doing this, you will be able to determine what you want to insure. Also, ask yourself; What insurance is legally mandatory for your business? Where do your additional liabilities lie?
2. Analyze your risk.
Analyze your additional risk and liability. This will help you determine which business insurance will offer the right type of protection. For example, if your company is on the bottom floor of an office building in a region prone to floods, you will likely want comprehensive flood insurance. However, a business operating in a dangerous industry will likely want a policy to cover the risk of its employees incase of injury.
3. Determine how comprehensive you want your insurance to be.
Depending on what you are insuring, you may need a basic level of insurance or comprehensive insurance. Especially one that covers all aspects of the potential loss. You will have to factor in how costly the loss would be and assess the probability of it happening. This will minimize the risk of overpaying for coverage you don’t need or skimping on coverage that is imperative for your protection.
4. Pick a provider.
Insurance providers aren’t all the same. Policies, premiums, and coverage vary, so do some research to find the best one to protect your business. Choose a few top providers, and compare them by policy coverage, cost, reliability, customer service and how they handle claims. This will help you find the best insurance provider as well as protect your business.