Business insurance is essential to protect businesses and their owners from unforeseen liabilities that can arise. Property damage, personal injuries, natural disasters, and lawsuits can arise at any time and cost businesses astronomical amounts of money. A strategic portfolio of insurance policies can protect against most of the unexpected disasters that can force a business into bankruptcy.
Below are eight types of insurance you should consider purchasing as a small business owner.
Product Liability
Innovative business owners almost always manufacture products in good faith and for the betterment of society. Unfortunately, the uncertain risks naturally associated with innovation can sometimes leave small businesses liable for unexpected product defects or personal injuries decades after sales were made. Businesses that depend on a small product range can mitigate legal risks with a product liability insurance policy that covers recalls, personal injuries, and unforeseen warranty claims. Product liability insurance can cover the full cost of risk exposure or act as umbrella coverage to mitigate inordinate expenses that could result from defective product liability lawsuits
Commercial Property
Commercial assets that represent a significant proportion of a company’s capital value should be insured to prevent unaffordable losses. Commercial liability insurance can cover machinery, office furniture, real estate, and much more. Most insurance agents are willing to negotiate a customized commercial property insurance contract for businesses that are concerned about the implications of losing a critical asset. Commercial property insurance can even cover inventory, outdoor landscaping, and the property of others. As a result, an investment in commercial property insurance is essential for risk management in both large and small enterprises.
General Liability
A plethora of legal liabilities can cost business owners millions of dollars, but they can be difficult to plan for. Many business owners prefer to purchase general liability insurance to keep their businesses protected from a wide range of unplanned liabilities and lawsuits that can arise from doing business. General liability insurance can cover premises liability, third party property damage, or liabilities assumed by the agency of employees. Some businesses are also required to purchase general liability insurance as a prerequisite to receiving a license from state or local governments.
Business Interruption
Most entrepreneurs assume that their business is fully prepared for disasters after purchasing a commercial property or general liability insurance policy. Unfortunately, policies that only cover the cost of physical assets are unlikely to save a business that suffers a disaster because ordinary business activities could be interrupted. Businesses could lose customer accounts, delay plans, or lose key employees as a result of a temporary operational lull. Therefore, business interruption insurance can reduce risks for low-margin or high-debt enterprises and business models that depend on assets that are difficult to replace. A supplementary business interruption insurance policy can enable entrepreneurs to recover the full value lost due to an unforeseen disaster.
Commercial Automobile
All states, with the exception of Virginia and New Hampshire, require drivers to maintain personal automobile insurance policies to legally operate a vehicle on public roads. However, states also leave businesses jointly or strictly liable in the event of an accident involving an employee. Businesses are even liable if an employee is working on behalf of a business while operating a vehicle that is not company property. Therefore, businesses that require employees to travel should hold commercial automobile insurance policies, even if these policies are not required by law. Commercial automobile insurance policies usually cover several million dollars in potential liabilities with a small monthly payment. Holding a commercial automobile insurance policy can help employees feel secure and reduce the cost of an accident.
Worker’s Compensation
Employers have a duty of care to protect the safety of all employees, customers, and even trespassers who could be harmed by a facility, equipment, or other individuals in the workplace. Businesses also can find worker’s compensation lawsuits difficult to defend because courts are usually more willing to favor the claims of an injured employee. Worker’s compensation lawsuits are very common and often force small businesses to close. In fact, the Bureau of Labor Statistics conducted a study in 2010 and found that worker’s compensation accounts for 1.6 percent of business expenditure, with higher figures in more dangerous industries. Many states require businesses to maintain worker’s compensation insurance because the total cost of a worker’s compensation lawsuit can often force a business and its owners to declare bankruptcy
Renter’s Insurance
Businesses that lease commercial real estate should have renter’s insurance for protection from liabilities associated with the terms of their lease contract. Tenants often face unplanned liabilities associated with their responsibility to return property in the same condition that it was in when they took delivery. Simple accidents that damage a rental property could result in large expenses that many business owners could struggle to afford. Tenants could also experience catastrophic damage from fires or natural disasters that could damage office equipment or interrupt ordinary business activities. Maintaining insurance can protect tenant businesses from hundreds of other unplanned liabilities that are often incurred throughout the term of a lease contract.
Business owner’s policy (BOP)
A business owner policy packages all required coverage a business owner would need. Often, BOP’s will include business interruption insurance, property insurance, vehicle coverage, liability insurance, and crime insurance . Based on your company’s specific needs, you can alter what is included in a BOP. Typically, a business owner will save money by choosing a BOP because the bundle of services often costs less than the total cost of all the individual coverage’s.
Picking the Most Important Coverage
Considering that there are many more forms of insurance than the eight above, it’s not surprising that many business owners are intimidated with the sheer number of options. However, as long as you focus on the eight types of insurance above, your business will be secure in the case of an on-job injury, accident, or natural disaster.
At Kaplansky Insurance, we believe you should be educated on their purchasing decisions. You’re not buying insurance just because you need to. You’re buying it because you want to be protected in case anything bad happens. Visit our Business Insurance Center to learn more.