Small business owners are used to operating within pretty tight margins. And sometimes that means cutting lower-priority business expenses like extravagant marketing materials or unnecessary overhead costs. But don’t make the mistake of slotting business insurance into that category.
Business insurance might feel like a superfluous expense for new or very small businesses. But each year 1 in 3 businesses experience an event that could have been covered by business insurance. No matter how careful you are or where you operate, your business is never too small or too new to get hit by a natural disaster, burglary, or lawsuit. Without business insurance, it’s up to you to cover costly repairs and damages, putting your business and your personal livelihood at risk.
10 common business insurance policies
There are a number of affordable business insurance policies to choose from—the key is to choose the right coverage for your business. You need a business insurance policy that gives you the most bang for your buck without charging you for coverage you don’t need.
Let’s take a look at some of the most common choices and the businesses they benefit.
1. General liability insurance
Choose this policy if: you own a business.
A general liability insurance policy includes all the standard coverage that every business needs. This policy covers a number of legal disputes with third parties, including accidents that cause bodily injury, property damage, defamation, and more. It also covers medical expenses if someone other than you or an employee is injured on the job site.
For example, if you damage a customer’s property while you’re working in their home, general liability insurance has you covered. If someone trips and falls over a piece of your equipment, your general liability insurance will cover any medical bills. However, this type of insurance does not cover negligence or damage to property owned by your business.
2. Commercial property insurance
Choose this policy if: you own commercial property.
Commercial property insurance fills the gaps in your general liability insurance policy. This policy protects your physical assets including real estate, equipment, and inventory in the event of theft, vandalism, or natural disaster. Commercial property insurance helps cover the cost of repairing or replacing damaged property owned by your business.
However, this policy may not cover certain natural disasters like floods or earthquakes, especially if these events are common in your region.
3. Workers compensation insurance
Choose this policy if: you have employees.
Workers compensation insurance is required in nearly every state if you have employees. This type of insurance policy helps protect you and your employees in the case of on-the-job injuries or occupational diseases. Workers compensation typically provides medical coverage and wage replacement while the injured party is unable to work.
4. Professional liability insurance
Choose this policy if: you offer professional services.
Professional liability insurance protects you against claims made against the professional services you provide. If you’re accused of doing something you shouldn’t have done, or not doing something you should have, a client could seek damages. Professional liability insurance can cover your legal costs to defend and settle a lawsuit against your business.
5. Product liability insurance
Choose this policy if: you sell products.
Product liability insurance covers risks related to manufacturing, distributing, or selling products, including design flaws and improper labels, warnings, and instructions. This type of insurance policy helps cover costs associated with an injury or property damage claim, including legal fees, settlements, and medical bills. It does not cover employee injuries, inventory losses, or recall costs.
6. Cyber liability insurance
Choose this policy if: you accept payments through your website.
Ecommerce and omnichannel businesses may benefit from cyber liability insurance. If you accept credit card payments through your website or store customer information, cyber liability insurance can help with losses related to data breaches, ransomware attacks, and other cyber crimes.
7. Commercial auto insurance
Choose this policy if: you have company vehicles.
Commercial auto insurance offers liability and physical damage protection for vehicles that are used for business purposes. If you make deliveries to customers or manage a fleet of drivers, you may need this coverage. A commercial auto policy protects your business if you or an employee has an accident or damages a company vehicle.
8. Home-based business insurance
Choose this policy if: you work from a home office.
A recent Gallup survey revealed that 45% of full-time U.S. employees work from home either all or part of the time. And that number is expected to climb. Whether you started a business from home or make good use of your home office, a home-based business policy enhances your existing homeowners policy to cover additional liability risks and loss of business income if your home-base is forced to shut down.
9. Business interruption insurance
Choose this policy if: your business would be impacted by a temporary shutdown of one location.
Business interruption insurance covers financial losses incurred while your facilities are shut down due to a disaster, such as a fire or natural disaster. It replaces lost income while your business is halted and may also cover certain operating expenses, moving costs (if it becomes necessary to relocate to a temporary location), and loan payments. Standard business interruption insurance does not typically cover epidemics or pandemics.
10. Umbrella insurance
Choose this policy if: you need extra coverage.
Umbrella insurance provides additional coverage beyond your existing policies. For example, if you lose a lawsuit for a greater amount than your existing insurance will pay, umbrella insurance takes care of the rest. It’s unlikely that you’ll find yourself in this scenario, but umbrella insurance is an affordable policy add-on that adds an extra layer of financial protection.
Choosing the right coverage
If your business does it, there’s probably an insurance policy that covers it. But the number of options to choose from, both policies and providers, can be overwhelming. If you’re not sure which direction to go, work with an insurance broker to compare coverage options and find the perfect provider for your insurance needs. Or, use an online insurance marketplace to choose providers and compare quotes instantly.
Keep in mind that insurance policies are rarely one-size-fits-all. You’ll likely need to bundle a few policies to create the perfect coverage plan for your business. Some policies come pre-bundled—for example, general liability insurance is often combined with commercial property insurance, creating a “business owners policy.” Many insurance providers offer a “bundle and save” approach—giving you the coverage you need at a lower cost.
But your insurance policy isn’t set in stone—and it shouldn’t be. It’s a good idea to reevaluate your policy on a regular basis to ensure it’s still providing the coverage your growing business needs.
Invest in the future of your business
Until you’ve experienced a disaster, business insurance can feel like yet another fixed monthly expense to track on your balance sheet—with nothing much to show for it. But a customer lawsuit, fire, or break-in can spell disaster for your business if you don’t have a policy in place.
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