Business insurance doesn’t have to be complicated. Running a business means exposure to many potential risks, so knowing what business insurance is and how it will help your business is essential. We’ll provide you with some important takeaways to help you understand business insurance and how it will help your business.
Business insurance (also referred to as general business insurance ) is coverage that protects your business (the “insured”) from the risks of liabilities that are imposed by any lawsuits or similar claims to your business. So, if anyone sues your business, legal fees associated with defending yourself and the compensation paid out if you’re found responsible are covered by business insurance.
Essentially, business insurance covers bodily injury (third-party) and property damage:
- Bodily injury – A client visits your retail store, falls over and bumps their head and they sue you.
- Property damage – One of your employees is visiting a client and accidentally drops a loaned laptop. Your business insurance will cover the costs to replace it.
It’s important to understand that this type of coverage offers basic protection. Regardless of the type of business you run, having this minimal protection is a must-have.
“I’ve got business insurance for my company so I’m protected”
Some small businesses believe that owning one type of insurance policy should suffice—bad idea. Businesses are unique therefore the type of coverage required to protect you will obviously vary. The more complex your business, the more coverage you’ll need, especially as your operations continue to grow and evolve.
As mentioned above, business insurance will cover the financial costs associated with lawsuits brought to your business but there are many instances where additional coverage is required.
Let’s say that one of your employees gets into an accident while driving your company vehicle to perform a job-related task. business insurance alone does not cover this. Commercial Vehicle Insurance is the type of coverage you’ll need to cover the damage to your company vehicle and/or medical associated with injuries the employee driving it.
Own several commercial construction trucks? They may be essential to your day-to-day operations. This is a perfect reason to have property business insurance.
Now, let’s say that this injured employee came back and accused your company of making him work long hours, which resulted in him not being as attentive, causing the accident in the first place. Here is a case where Directors and Officers (D&O) Insurance could protect your company against allegations of HR mispractice (as well as “wrongful acts” such as errors, omissions, breach of duty, neglect and misleading statements made on behalf of the company.
With the example above, you can imagine the many scenarios and potential lawsuits that could arise. There are a number of things that business insurance may not cover so it’s wise to speak with an experienced broker her can work with you to identify gaps that could be filled and protected.
To sum it up, a business can not only have one type of insurance-it’s virtually impossible to have one type of business insurance coverage for every business. Let’s take personal insurance as an example-would you have auto insurance for your pet? The needs (whether commercial or personal) obviously determine the type of coverage, not to mention the level of coverage.
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“What kind of business insurance do I need to protect my business?”
There are several types that you need to look out for so it’s entirely up to you what will make the most sense for your business:
- Product business insurance – protection in the event that your product is defective or causes serious harm to anyone using it.
- Professional business insurance – covers you if you are sued by a client for any errors in advising and/or consulting.
- Personal injury – a customer is walking through your store and falls over, injuring themselves
- Cyber liability – protect your business if a lawsuit is served to you when a cyber breach, compromising personal and commercial information. Depending on the policy, it could also cover you from the damage or theft of devices that contain personal or commercial
- Property damage – An employee damages the window of a client while working on the siding of a house
- Reputational damage – You’ve defamed a competitor in an interview and are charged with libel or slander
“I run my business from home—why do I still need business insurance?”
A small business owner working out of his home office will still need business insurance
It’s important to consider the type of business you own and any risks associated with your operations. While business insurance covers the minimum costs, there are additional protection coverage policies that your home business will benefit from.
Let’s consider this from a service perspective. Say you are a financial consultant who provides investment advice or accounting services to your client. You’ve prepared financial statements for them and there was an error on your part. Numbers don’t align and as a result, they lose large amounts of money. In such a case, you won’t only need business insurance, you’ll require Errors and Omissions (E&O) insurance to protect you from any lawsuits served to you.
Business Insurance Doesn’t Harm Your Business—It Helps It
Owning it means that you’re taking initiative and being proactive. The premiums that you pay are nothing compared to the time, resources and money lost in association with being reactive to any lawsuit brought to your business.
In fact, not having any insurance at all may even deter other businesses from partnering or working with you. The loss of potential business opportunities just isn’t worth not having any coverage.
Searching for the appropriate coverage options may feel daunting at first. It’s important not to worry what the insurance is called. Instead, focus on your business, its needs and then understand what potential risks could arise to help you identify the right kind of protection necessary.
If You Don’t Know, Now You Know—A Quick Recap
- Business insurance is coverage that protects your business (the “insured”) from the risks of liabilities that are imposed by bodily injury or property damage lawsuits to your business. It’s foundational insurance and is always recommended to all business owners, regardless of the type of business you own.
- It can also be referred to as “general business insurance ” however you shouldn’t focus on what it is called—you need to assess your company’s needs and potential risk as this is important in identifying the appropriate protection.
- Depending on the nature of your business, you may need to couple it with other types of business insurance policies.
- If you run a business from home, business insurance is still important to have. Think about the products and/or services that you provide to your customers and the risks surrounding them.
- business insurance will actually help your business—most businesses and customers require that you have business insurance before working with you. As an example, if you own a construction business, contractors will require that you have business insurance. If you are working on a residential project, clients are becoming apprehensive about hiring contractors who don’t have any insurance.
- Searching for business insurance doesn’t have to be a daunting experience. The first step is to understand the potential risks that your business may face – this will help you figure out the protection that you need.