Having the right insurance for your small business is just one of the prices of doing business
If you are a business owner, vendor, or contractor, business insurance is essential. In most states, you are required to carry certain types of coverage. What kind of commercial insurance do you need? We discuss seven types, what they cover, and if you need such coverage for your small business.
1. General and professional liability
Liability insurance is one of the most basic types of commercial coverage, but also among the most essential. There are two categories of liability coverage.
This covers legal expenses if you are sued and found liable for an injury or damage to someone else’s property. It also covers medical expenses and lost wages if the injured person requires medical care, hospitalization, or can’t work.
What it covers:
- Bodily injury claims
- Medical payments if someone is injured on your property
- Property damage caused by your business or an employee
- Reputational harm in case you face prosecution, libel, slander, wrongful conviction, or privacy violations
- Advertising errors including lawsuits over copyright infringement
If you deal with customers or clients in your store or office, you should certainly carry a general liability policy. It will protect you in the event of a lawsuit. If you are a contractor or vendor, you also need general liability.
Sometimes called errors and omissions (E&O) insurance, professional liability is meant to pay your legal expenses if a client sues for damages based on services that you provided.
Examples of professional liability claims might include:
- Bookkeeping errors that result in a client losing money
- A mistake by a web developer that causes a client to miss sales
- Filing an incorrect tax return for a client, which results in a penalty
- Medical malpractice claims
- Computer system failure that results in a cyber event (compromised data)
In some states, you must carry professional liability by law. Anyone that provides healthcare or medical services needs malpractice insurance. Some clients might also require you to have professional liability as part of your contract.
Examples of businesses that should have professional liability coverage:
- Law firms
- Home inspectors
- Healthcare providers
- Technology professionals
- Website designers
2. Property insurance
If you own, rent, or lease a space for your business, you need property insurance. It will cover damage to physical space or building, equipment, signage, and furniture. Covered events include fires, storms, or theft.
Be sure to check your policy because general property insurance does not always cover damage from mass-destruction events like floods or earthquakes. You may need to have a separate policy for those, particularly if you are in a state that is prone to natural disasters.
3. Workers’ compensation
Workers’ compensation is usually required if you have at least one qualifying employee. It covers medical bills and lost wages of employees who are injured on the job. It also includes disability and death benefits.
Of course, if you own a factory, manufacturing plant, or construction company, you need workers’ comp for employees. However, workplace injuries can occur in any business, even in a seemingly low-risk office setting. For instance, an employee could trip over a power cord or develop back pain or carpal tunnel syndrome due to ergonomic issues or repetitive motions over time.
The amount of coverage needed is based on the type of industry, the number of employees, and the cost of living in your city. Most states require a minimum standard, so be sure to comply with the regulations where you live. If your company employs people in other states, you will need to know the workers’ compensation laws in those states, as well.
4. Product liability insurance
If you manufacture and sell a product to the general public or business-to-business, you will need product liability insurance. It is meant to protect your business in the event you are sued for damages caused by your product.
5. Commercial auto insurance
If your company owns vehicles that are used for business purposes, they must be insured. It will protect you from liability if there is an accident in which you or an employee is at fault.
However, if employees are using their vehicles for your business, their insurance will cover them if an accident occurs. There is an exception, and that’s if they use their vehicle to deliver goods and services for a fee.
6.Business interruption insurance
If your business has to shut down because of damages from a natural disaster or other catastrophic events, business interruption insurance can help cover lost income. If your business is in a physical office or retail space, you should certainly consider this type of coverage.
There are some limitations and restrictions regarding what is considered a covered event. For instance, most policies do not cover business closures due to COVID-19. Business interruption is meant to cover work stoppages that are related to physical damage or loss of property.
7. Cyber insurance
Another type of insurance that you might not have considered is cyber insurance. With cyber attacks on the rise, protecting the sensitive data of clients, customers, and employees is more important than ever. A 2018 report found that businesses experienced 571 breaches, exposing over 415 million employee and customer records.
If your business were to become a target, you could pay a lot of money to recover data and your lost reputation. You could also face lawsuits if you are found to be negligent.
Cybersecurity, privacy, and media liability” covers losses and damages due to a cyber attack or data breach. It covers hacking and viruses that could corrupt your files or your entire system.
In some cases, general or professional liability will cover cyber events. However, if you own a business that collects and stores a lot of customer, client, or employee data, you may need extra coverage.
Retail stores, e-commerce stores, financial institutions, healthcare providers, and accountants/CPAs are especially vulnerable. Any business that accepts credit card or bank draft information, either in person or online, is at risk.
Insure your business to protect your business
Commercial insurance is an essential part of doing business. It’s important to protect your most important asset, so you don’t end up with a financial disaster. These seven types of insurance are necessary for most small businesses that have one or more employees.
Avante Insurance can help you secure the right commercial insurance to protect your small business, including:
- Commercial property
- General liability
- Commercial auto
- Workers’ compensation
- Professional liability
- Employment practices
- Commercial umbrella
Contact us to talk about your commercial insurance needs and request a quote. We will ensure you have the right coverage to protect the business you’ve worked so hard to grow.
This blog and website are made available by the publisher for educational and informational purposes only. It is not to be used as a substitute for competent insurance, legal, or tax advice from a licensed professional in your state.