Now that you have a business you are going to protect it from several possible sources of damage. Any business comes with eventual issues: damages to the building and its contents, harm to employees, dissatisfied customers who may sue you, economic losses, and so on. The importance of business insurance is about keeping you financially whole: else, you wouldn’t face the expenses, or be in serious trouble anyway; you should consider buying some coverage even if you have a small business, that would still cost you a lot if something went wrong. A lot of bigger companies prefer to work with business owners who are insured: doing so, you would give proof of intended financial solidity as well as professionalism.
When it is spoken of business insurance, the standard, most commonly bought is the “Business Owners Policy” available for small enterprises with under 100 employees and annual income of $5 million as maximum. It is comprehensive of coverages for the main risks you might face (as discussed later), but you can customize it to fit the needs of your specific business. Of course, major insurers can provide tailored policies for medium-sized and large businesses, as well.
Business insurance comprehends different policies for the most varied needs, some of which are more essential, while others being optional.
Workers’ compensation, general liability, and commercial property insurance are in the first line, the ones every business owner should have: they protect against the most likely risks related to business operations.
– General liability insurance is about injuries or damages your company may cause to third parties, their belongings, or reputation. Third parties are defined as anyone who has no employment relationship with you; if you have premises that customers, suppliers, and other people can get access to, or you have a product that can do some kind of harm, then general liability coverage is a must. It will cover the money needed for medical expenses due to injured people, customers’ property repairs, and/or prospective legal costs you would bear for paying attorneys and possible prosecution. An umbrella policy is an excess liability coverage with limits above $1million and up to $10 million, depending on companies.
– Commercial property insurance: it covers the physical assets such as the building in which the business has its place, the contents including all the equipment, furnishings, and items; think of computers, electrical system, etc. The main covered perils are fire and theft, while floods (from ground water) and earthquakes are not typically included as standard; the commercial insurance reimburses the insured amount less a deductible that is arranged in the submission process. Property insurance isn’t required by law unless you have a loan secured on a piece of commercial real estate
– Business owner’s policy (BOP): it is the combination as a bundle of the two previous above-mentioned policies, resulting in a lower cost than you would pay for buying both separately. The advantage is mutual for the buyer and the insurer, furthermore it includes business interruption coverage (explained in this list). BOP has the amplest variability of annual costs, depending on many factors, among which the amount of coverage desired and the size of your business. Revenue is also a major factor as regards the eligibility for this insurance: you must have a profit not greater than $1 million/year; besides, your industry must be considered “at low risk”.
– Workers’ compensation insurance is fundamental if you have employees in your business. If something happens to them while you are not carrying it, you will incur penalties and levies according to your State regulation. In fact, it covers expenses for health issues if employees underwent injuries or suffered illness because of job operations, in addition to reimbursing potentially lost wages; this portion of policy may include protection for you against legal disputes. Some States (North Dakota, Ohio, Washington, West Virginia, and Wyoming) demand a state-backed fund to be used by business owners, instead of policy; since workers’ salary is regulated by law, the location of your business is a determining factor as for the extent of this coverage. Premiums vary widely depending also on the size of the staff and the risk profile of each member.
– Professional liability insurance is a specific form of protection versus customers’ potential claims about economic losses for the usage of your products or services; in fact, this is sometimes referred to as “error and omissions”. Your fault might be giving false advice or promises (and then be sued as a professional/expert in your field, e.g. for medical bad practice), or still any kind of negligency. In essence, this coverage is for sustaining the subsequent legal costs.
– Commercial auto insurance is about vehicles being used during and for business activities; it is a form a liability coverage that applies when a car or truck being driven by you or your employees cause damage to other vehicles or bodily harm to individuals. The vehicle could be of your own property, rent, or leased, but it must be demonstrated that it was used for business purposes; in some cases, it’s recommended that employees carry their own vehicle insurance if they are using it for the job tasks. This insurance may also cover damage to your car, and medical bills both for yourself and others.
– Business interruption insurance is meant for the occurrence of a physical loss of your business property causing a stop to your activities, thus financial damage. You will have later to restore the business, recover missed income, and paying the related expenses, nonetheless, you will want to come back on the market as soon as possible; a certain frame of time will pass until the premium comes into play, so you will be asked to choose a deductible amount, in order to quickly cover your business needs. Be careful to clarify the period necessary for you to be covered, since this policy could lend itself to misinterpretations. Remember that the interruption insurance is often included in a BOP: check it out before applying.
For growing businesses, that have become of medium or big sized, some other coverages are available and very likely to be needed:
– Employers’ liability insurance is a legal requirement. When a few numbers of employees are in your business, you know they have rights as dependants. Should it happen that they don’t feel safeguarded anymore, or violated in their rights they will sue you, and today this is a common legal issue. This policy covers lawsuits against many perils: discrimination, missed employment or promotion, lacking career advancement, infringement of the work contract, mistaken termination, negligency, bullying including any sexual intimidation, triggering of emotional distress. You can buy it separately or best as an endorsement of a BOP; premium depends on size of the staff, type of business, risk factors involved, location. The policy will reimburse your company also for judgments or settlements, in the case of a negative outcome.
– Key person insurance is a special form of life insurance applied to the most important person in your business: if an individual worthy for his/her competencies dies or becomes disabled, the company will of course suffer at least short-term financial loss or would have a somewhat negative impact on running of the business. Such contingency is covered by this insurance. If the key person is yourself, inheritors or other members of the business in partnership with you, and employees will benefit from the insurance payouts: they act as a cushion for the time to find a new person or to implement other strategies to save the business.
– Directors and officers’ liability insurance (D&O): if in your company you have the role of director or officer, with this policy you will be covered from lawsuits claimed by shareholders, investors, or third parties for financial damages and security issues inflicted upon them. This is a kind of error and omissions policy. It covers also chiefs’ personal assets, in case these can’t be indemnified because of bankruptcy or law indisposition. While it is uncommon that you could be attacked being in this position, D&O can only be recommended because of the potential humungous amount of money at stake; sometimes, criminal and civil actions are conducted purposely against the business. Some companies may include coverage from discrimination, wrongful termination, and matters related to employment.
– Cyber liability insurance: if your business has to do with technology and handling sensitive customers’ online data, it can be necessary coverage against possible breach resulting from cybercriminal activity: you will be held responsible for data loss and sued, so this policy will cover your legal expenses.
The cost for insuring your business will vary greatly depending on multiple factors: type (industry) and size of the business, its location, annual revenue, and the number of policies you will purchase. Also, you have to consider: your business’s classification (e.g. if you are the unique owner, corporation, etc.), number of employees numbers, kind of day-to-day operations, intrinsic risks (i.e. bodily injury of laborers), the composition of the business in its whole (buildings, equipment, stocks) and relative value.
That said, we have found from Progressive Commercial the median cost for a business owner’s policy to be $744 yearly.
General liability insurance as standalone would cost annually a median of $552; a workers’ compensation policy is paid $816/year; professional liability is worth $504 per annum.
(Insureon online agency) customers, who have small businesses, pay a median of $900 for an umbrella commercial insurance, while $1,704/year for a business auto policy.
There are limits to how much a company can cover: for a business owner’s policy a standard is $1 million/$2 million, while medium and big sized are likely to need greater. This means:
You can and should customize your limits for your needs, and their availability will depend on the financial strength of the company of choice.
Umbrella policies have the biggest limits, that will serve to cover a greater liability portion of your insurance.
Those amounts are guaranteed during the entire lifetime of a policy, which is generally one year. If the incident occurred after its expiration, you couldn’t be indemnified (unless renewing the policy).
Like with homeowners insurance, a policy for your business is your best investment for a safe (and hopefully brilliant) future. You probably won’t need every type of coverage mentioned above, but it is critical that you choose the right amount of coverage for the ones you believe are necessary.
Ask an agent who is specialized in your industry, so that you can weigh the risks and going on a straightforward process. Get multiple quotes from trustworthy and solid companies, that can have the means to ensure you full amounts of reimbursement if something serious happened while offering quality service at prices affordable for your finances: your best deal has to be an informed decision.