Which insurance coverages does your business need and why?
Insurance can be confusing, even for people who’ve been in business for years! Most businesses need a mix of coverage in different amounts to protect their assets. That can include workers’ compensation, general liability insurance, professional liability, business interruption insurance, and more. All these coverages protect different aspects of your business from your physical property to your people to your data.
What is general liability insurance, and why do you need it?
General liability coverage is one of the broadest and, in some ways, most basic insurance a business needs. It protects the business in the event of a customer injury, damage you may cause to someone’s property, trademark infringement and other advertising injuries, and more.
Some states require it for every business, no matter the size or nature of the business, but it’s a good idea for every company to invest in general liability insurance for its own protection.
If you are sued, it will cover the following, as long as those amounts are within the limits of your policy:
- Attorney’s fees
- Court costs
- Settlements or judgments
General liability does not cover professional mistakes; if you’re an accountant and mishandle someone’s financial matters, even accidentally, your general liability coverage won’t help if you’re sued. (That’s when professional liability, such as medical malpractice insurance, comes in.) It also doesn’t cover injuries to your employees while on the job.
Who needs workers’ compensation coverage?
Workers’ compensation coverage is mandated by the state and is usually required of any business that has even one employee. That mandate includes the amounts of coverage needed.
In general terms, workers’ compensation covers injuries sustained while an employee is on the job. That includes work being done on another site, not just in a company’s primary location or job site.
Construction workers, for example, are covered by the employer’s workers’ compensation insurance on any job site they work on. Delivery personnel are protected by workers’ compensation anywhere as long as they are on the clock. Workers’ compensation coverage will help pay for:
- Medical expenses, including recovery, for work-related injuries to your employees
- Replacement wages if an employee can’t work
- Liability expenses if you are sued by an employee injured on the job
- Support for dependents and funeral expenses in the event of a fatal workplace injury
Although people often think of physical jobs such as shipping and construction as those that result in workers’ compensation claims. Although those industries certainly have their share of injuries, workers’ compensation protects all employees who are injured, including repetitive injuries or ergonomic issues for sedentary workers.
Some sole proprietors carry workers’ compensation on themselves, but it’s generally prohibitively expensive to do so. Sole proprietors who do get that coverage tend to work in more dangerous arenas, such as construction, which is why the coverage is costly. California, for example, requires it for roofing contractors, even if they do not have employees.
How are workers’ compensation and general liability insurance the same?
Both coverages can protect your business in the event of an injury. They both may cover medical and legal expenses related to anyone being injured in or because of your business. The difference is who is covered by each kind of insurance.
How are these two coverages different?
General liability insurance covers your clients, customers, and the general public if they are injured at your place of business. Slip and fall injuries in supermarkets are a common example. It explicitly does not cover your employees. That’s why the state typically requires workers’ compensation for any business that has employees, at a level of coverage sufficient to cover most potential claims.
Conversely, workers’ compensation coverages only come into play when employees are injured. (Occasional contractors and subcontractors are not considered employees and do not count toward workers’ compensation coverage calculations.)
How can you be sure your business is covered properly?
Talk to a professional! Insurance coverage should never be set on auto-pilot – every renewal should be accompanied by a review of your coverage needs. As your business changes and grows, your insurance needs will change too.
New equipment, changes in office space, new lines of business, additional employees – all these things can affect the amounts and types of coverages you need to make sure your assets are safe.
A good insurance broker will be able to look at your business and your coverage with the knowledge and skill to do just that
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.