There are many different types of business insurance and what type of business insurance you need will depend on the type of business you run and what the potential risks to your business are. While different types of policies provide more niche coverage, generally businesses take out business insurance to help cover potential damage to property, to protect from lawsuits, or to fight contract disputes.
Keep reading for more insight into what business insurance is, how it works, and what types of coverage your business may need.
Business insurance is a type of insurance that protects business owners from financial exposure in the event of a loss. An insurance broker can help business owners determine what their risk level is and how much coverage they need to fully protect themselves. If you’re looking to work with an insurance broker, you can review a list of licensed agents in your state through your state's department of insurance or the National Association of Insurance Commissioners.
Business insurance is also known as commercial lines insurance and provides coverage that protects businesses from potential financial losses they couldn’t afford to pay on their own. Without business insurance, many businesses would not be able to operate as the risk of doing so without insurance would be too high.
Business insurance can provide protection for:
There are a few different types of business insurance on the market and you may find that your business needs one or more of these different forms of insurance.
A professional liability insurance policy insures against negligence claims that stem from either a business’s failure to perform or a mistake they make.
Property insurance provides coverage for a businesses’ property such as equipment, inventory, and furniture that becomes damaged in the event of a fire, storm or theft. Mass-destruction events like floods and earthquakes aren’t covered by this type of policy. If your business resides in an area that is at risk for a mass-destruction event, it’s important to remember to take out a separate insurance policy that covers that type of event. Usually, you can do this in the form of an insurance rider that you add on to your initial property insurance policy.
A business income insurance policy helps replace lost income if your business must temporarily close because of a covered loss. Covered losses can include events like property damage caused by fire or theft. The payout from this type of policy can also make it possible for you to continue to pay your business expenses while your property is replaced or repaired.
If you run a business out of your home, you’ll find that a homeowners insurance policy won’t provide coverage for home-based businesses. You’ll need an additional home-based business policy to financially protect any equipment or inventory you store in your home.
Businesses that manufacture products and sell them will need a product liability insurance policy that will provide protection in the event that the business is named in a lawsuit because of alleged damages caused by its products.
If you use a vehicle as part of your business operations, you’ll need vehicle insurance that is separate from the driver’s own auto insurance coverage—unless they are using their own car for business purposes. Even then, if someone is delivering goods or services for a fee, then their personal policy won’t provide protection. At a minimum, businesses will want to insure themselves against third-party injury. Ideally though, they will take out a comprehensive vehicle insurance policy that covers the vehicle in case it’s ever involved in an accident.
Most states with employees require businesses to carry workers’ compensation insurance that gives employees benefits that help them recover from a work-related injury or illness. In some cases, a worker’s compensation insurance policy can give an employee's family a benefit if they lose their life in a workplace accident.
A business interruption (also known as business continuation) policy, is a type of insurance policy that protects businesses that use a physical location like a retail store, manufacturing facility, or warehouse to do business. This policy will compensate a business for income lost because an event causes disruption to the normal course of business.
Not sure what type of policies you need to protect your business? We’re happy to walk you through your options so you can get some much needed peace of mind!