Buying insurance can be confusing and expensive. It’s easy to get frustrated when you know you won’t see the benefits unless you have an accident, loss, or claim.
But whether you have insurance can make or break your business.
Without the right business insurance, a disaster or theft can lead to devastating losses. A data breach lawsuit could leave you struggling to pay your employees, let alone attorney fees.
Many small business owners haven’t evaluated their insurance needs. So, they don’t have appropriate coverage. Forty percent of small business owners don’t have any insurance at all.
Business insurance can help pay the costs of lawsuits, property damage, loss of income, and other covered losses. Businesses often buy more than one coverage or combine several into one insurance policy.
What do these policies cover—and is there anything that’s not protected by business insurance? Keep reading as we answer these questions and more.
Do You Need Business Insurance?
If you’re the owner of a sole proprietorship, limited liability company, a corporation, or another business entity, you need business insurance.
These policies protect you from being personally liable for potential debts and judgments. However, most standard business insurance coverage won’t protect your business from a flood, earthquake, data theft, or a wrongful termination and harrassment. Your insurance also can’t come to the rescue if you’re personally accused of being negligent.
Luckily, there are options if you would like to explore adding more coverage.
To determine whether you need business insurance, ask yourself a few questions.
Does your business have any property that you can not easily afford to replace? This property includes computers, inventory, and machinery. If you work from home on a laptop, you may not need to insure it. However, if you hold tens of thousands of dollars in inventory, adequate insurance is vital.
Is there a moderate chance that someone could sue your business for a large amount of money? Let’s say someone has an accident on your property, you suffer a large data breach, or you sell a defective item that injures someone.
If you answered yes to either of these questions, you should minimize your risk with business insurance.
Depending on where you live, you may be required to buy an insurance policy whether you determine you need one or not. State laws vary by state, so it’s essential to review your state’s laws.
Federal laws require every business with employees to have unemployment, disability, and workers’ compensation insurance.
To ensure compliance with federal and state regulations, always consult with your business insurance agent. They will help you find an insurance policy that meets state requirements and stays within your needs and budget.
Types of Business Insurance Policies
One of the most popular business insurance policies is the business owners policy (BOP).
A BOP typically wraps several coverages in one policy. It can protect your business from several claims, including property damage and bodily injury. It will also usually include general liability insurance coverage.
Combining coverages in this way is more convenient and helps business owners save money using bulk discounts.
If you’re a business owner, looking into a BOP should be your first step. Then you have the option to add additional coverage.
Business Property Insurance
Business property insurance offers extra protection for your business’s buildings and personal property. Property may include desks, tools, inventory, and equipment.
Business Income Insurance
If you close temporarily due to a covered loss such as property damage from fire or theft, business income insurance can replace lost income. This coverage also helps you continue to pay business expenses while you arrange property replacement or repair.
Professional Liability Insurance
You can be held liable if your business makes errors in rendering its professional services. Professional liability insurance can cover costs related to these claims.
Let’s say your assistant makes a clerical error that causes a big client to lose a lot of money. With this insurance, you can help cover the costs if the client files a lawsuit against you for damages.
You don’t necessarily have to do anything wrong to get sued. In some cases, professional liability insurance coverage can also apply to defend your business in court if sued.
Home-Based Business Insurance
More businesses are operating out of homes than ever before. Home-based business insurance can cover the cost of liability risks if you run your business from home.
If you have office equipment or supplies at home, or frequently have employees or customers stop by, this is an add-on to consider.
Workers’ Compensation Insurance
If employees cannot work due to a work-related injury or illness, they can utilize workers’ compensation insurance. This allows them to focus on getting better and back to work by providing reimbursement for their medical bills and lost wages.
If an employee or their family sues your business after an accident, workers’ compensation can come into play here, as well.
Cyber Liability Protection
Cyber liability insurance protects your business from the risk of cyber threats. The costs associated with a data breach are high. Not only do you have to find the source of the attack and mitigate the damage, but you must also communicate the breach to those affected.
There are also public relations costs to consider as you manage your companies reputation. If you collect personal information from employees and customers, a policy that includes cyber liability insurance is a must.
Commercial Auto Insurance
Does your company own vehicles that you or other employees frequently drive for business? It would be best to have commercial auto insurance to cover potential bodily injury claims and property damage stemming from accidents.
It’s vital to understand that personal auto insurance policies do not cover third-party claims if you or an employee is in an accident while driving a company vehicle.
Commercial Umbrella Insurance
If you’re concerned about risk, consider a commercial umbrella insurance policy to offer additional coverage if other policies reach their limits.
For example, let’s say a customer falls and injures himself as they walk into your store. Afterward, he files a claim against your company for $1,150,000 to cover his medical bills. If your general liability policy only covers up to $1,000,000, you would be responsible for the difference. A commercial umbrella policy would cover the remaining $150,000.
Commercial Flood Insurance
In the case of a flood, commercial flood insurance can cover the cost of property that suffers water damage. It can also cover damage to your property’s physical location.
For example, floodwater seeps into your company’s basement, where you store computers. A commercial flood policy would cover the cost to repair or replace the computers and flooring.
Employment Practices Liability
Employment practices liability insurance will protect your business if an employee sues you. Even if you’re innocent, defending any lawsuit is a pricey endeavor.
If an employee makes a claim against your company for harassment, discrimination, or wrongful termination, this policy can help cover the costs.
Risk management services are designed to create a safer work environment. These services include an assessment of risk exposure by professionals and can often be provided by the insurance company.
You’ll receive improvement programs and plans designed to train you and your staff to follow safety protocols to handle accidents. Utilizing risk management services can lead to a more productive, safer, and profitable business.
If your business operates outside of the US, a multinational insurance policy can provide coverages for all of your business’s insurance needs.
Multinational insurance has many moving parts and requires coordinating specific binding instructions, including policy issuance, claims payment, and engineering services across multiple countries and cultures. Find a policy that can provide seamless coverage, no matter where your businesses are located.
What Does Business Insurance Not Cover?
If you have a standard business insurance policy, it may not cover losses from floods, earthquake, and other major weather events. These policies also won’t cover damage done to customers’ property while they are at your business.
Intentional and fraudulent acts are also not covered by standard commercial insurance policies. Standard policies also don’t include auto accident coverage. As discussed above, you need a commercial auto policy for that.
As you can see, standard policies can often be restrictive in what they cover. To add some of the coverages we discussed above, speak to your insurance agent about your available options.
How to Choose the Right Business Insurance
When you’re ready to choose business insurance, you know how important a decision you’re making.
Without adequate coverage, you may leave yourself paying for unexpected incidents out of pocket. This gets expensive fast, and most small business owners can’t afford it.
You also need to spend time finding the right insurance company. An insurance company is more than the policies they offer. They must also provide excellent customer support, so you know you’re in the right hands when filing a claim. Without the right customer support, your business could suffer.
Here’s how to assess and choose the right insurance coverage for your business.
Assess Your Business and Understand the Risks
You now know that policies are unique to each business. This is so you can tailor your insurance to the specific risks that your business faces.
Some questions to consider:
- Do you have employees?
- Does your business have a physical location that employees or the public access?
- Do you use your own vehicle or a company vehicle when working?
- Can your business survive the financial strain of a hefty insurance claim?
To determine which coverages you need, use these questions to assess your business needs.
Research Business Liability Insurance Policies
To protect your business from a variety of risks, you’ll probably choose more than one policy. We’ve listed several policy options above.
With an idea of what each policy offers, it’s time to go deeper in your research to determine which benefits you need. When you meet with your insurance agent, come prepared to guide the conversation toward the policies you need.
Get a Quote
Next, you’ll need to obtain a quote for business insurance. Reach out to the companies you’re interested in and ask for a quote that includes:
- Coverage details
- Customer testimonials
When you have quotes in front of you, you can begin comparing insurance rates. Pay attention to coverage details and policy specifics, as these vary by insurer.
Don’t let cost be the deciding factor. Cheaper isn’t always better—especially if it means getting a policy that doesn’t offer the protection that your business needs.
Take an adequate amount of time to read customer reviews, case studies, and testimonials. You can learn a lot from a company’s existing and former customers.
You also must be sure that customer service is up-to-par. If the worst-case-scenario comes true, you want to know you have an insurance company that is dedicated to helping you.
Purchase Your Policy
Once you’re happy with a policy and price, you can work with an insurance agent to buy a policy.
They will walk you through the process and be your contact if anything should ever go wrong. It’s also essential to periodically review your coverages as your business grows.
For example, if you’re suddenly getting more sales, you may need to up your general liability insurance coverage to mitigate potential risk. Alternatively, you may find that you’re carrying too much coverage and decide to reduce it over time.
Request an Insurance Quote Today
You’ve worked hard to build your business, so protect your investment with the right business insurance coverage. Several kinds of policies are available, including coverage for property damage, employee-related risks, and legal liability.
Don’t waste time doing all of the legwork on your own. EPG Insurance is committed to providing a better insurance experience. We will work on your behalf to shop for business insurance that meets your business’s needs and budget.
Let us know what you’d like an insurance quote for, and we’ll get to work today.