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Business Insurance Basics: Here's What You Need to Know

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If you own your own business, you face risks every single day. Business insurance is designed to help protect you and your business from those risks. This includes your financial assets, business property, and intellectual property.

Having business insurance in place is a big relief. You have the peace of mind knowing that if something happens, your business is protected. That’s why it’s important to understand what risks you face and how to cover them. 

What is the Purpose of Insurance?

What does business insurance cover? Business insurance can protect your business from liabilities such as:

  • Lawsuits
  • Property damage (theft, vandalism, fire)
  • Loss of income
  • Employee injuries

Different types of business insurance are designed to protect you from these various exposures. 

Types of Business Insurance

What are the most common types of business insurance policies you should consider? 

Liability Policies

Every business needs some basic insurance coverage.

  • General Liability Insurance: General liability covers your basic liability i.e. if someone gets injured on your premises (bodily injury) or property is damaged in the course of your work. Your insurance company can cover legal costs associated with a lawsuit and costly settlements. A general liability policy is a good foundation to build on, but it doesn’t cover every situation your business might face.
  • Home-Based Business Insurance: If you’re operating your business out of your home, your homeowners insurance will cover your personal property, but very little of your business assets—if anything at all. Talk to your insurance company about getting specialized coverage for home based business owners.
  • Professional Liability Insurance: Professional liability insurance (also referred to as errors and omissions insurance) protects your business from being held liable for negligence or mistakes made associated with your professional duties. This insurance coverage includes damage to property, people, as well as implied damages. Your insurance company will also covers the cost of litigation for these claims. It is usually needed by professionals like accountants, attorneys, or consultants.
  • Commercial Umbrella Insurance: One way to make sure you’re covered against a truly catastrophic event is to have the right commercial umbrella policy. This type of insurance policy can cover what exceeds underling insurance policies. Your insurance agent can help you determine the right scope for an umbrella policy depending on your business type, size, and value of assets.
  • Directors and Officers Insurance: Directors and officers liability insurance (D&O Insurance) protects individuals and their personal assets if they’re sued for actual OR alleged wrongful acts while they manage a company. This insurance policy will cover legal fees and settlements. 
  • Product Liability Insurance: Product liability coverage will protect your business from claims associated with personal injury or property damage associated with products you manufacture or sell. This can include food, medicine, toys, furniture, and many other types of products. 

Employee Policies

What do you need to protect your employees?

  • Workers' Compensation Insurance: A workers’ compensation insurance policy protects your business from costs incurred by worker injury, long-term issues like repetitive stress or lung damage, and even the death of a worker. Your insurance provider can cover their medical expenses and lost wages for a portion of time. Many states require workers’ compensation if you hire employees. 
  • Employment Practices Liability Insurance: EPLI protects the leadership in a small business against claims (sexual harassment, discrimination, wrongful termination, etc,) made by employees, potential employees, or former employees. This can include the cost of defense as well as settlement. 
  • Commercial Auto Insurance: If you use company cars or trucks as part of your business, you need to consider a commercial auto insurance policy. It will protect you and your employees from liability if an accident occurs (insurance companies will often exclude business-related claims from personal auto policies). 

You can consider other coverages for your employees such as disability insurance and health insurance.

Property Policies

Small business owners that own or lease property for their business should consider these property-related policies. 

  • Commercial Property Insurance: Commercial property insurance will protect your building and physical property—either owned or leased—from a natural disaster, fire, vandalism, or theft . In addition, furniture, equipment, machinery, tools, computer and phone systems, and anything used to conduct business will be protected.
  • Commercial Flood Insurance: If your business is in a flood zone, you’ll need protect from floods. Flooding is excluded from most property insurance, which is why the additional policy is necessary. 

Small Businesses Should Consider a Business Owners Policy

Small business owners should look into a business owner's policy (BOP). A BOP includes general liability, commercial property, and something called business interruption insurance at a more affordable price than purchasing each policy separately. 

Business interruption insurance can help cover your financial obligations (taxes, payroll, lost income, and other operating expenses) if your business is damaged and you’re unable to operate while it’s being fixed or a new location is being prepped. 

How to Get Business Insurance

We understand that buying business insurance can be a daunting process. Here’s how you can get started and what you need to know.

Where Do You Start? 

Trying to narrow down your options when searching for insurance for a business can be overwhelming. Keep these points in mind when considering commercial insurance choices:

  • Experience with your segment: A company well-versed in handling insurance for a business like yours will have the answers to common questions and will be able to help you navigate your needs and give you direction in areas where you need it.
  • Access to A-rated carriers: Finding insurance for a business is hard enough without worrying that the carriers your provider uses aren’t top quality.
  • Timely service: You want experience and professionalism first and foremost, but there’s no reason that those things should come at the expense of your time. Your provider should value your time, and quotes and answers to questions shouldn’t take more of that than necessary.

What Do They Need to Know?

Finding insurance for your business can be easier if you know the standards that insurance companies are using to evaluate your business. Here are some common questions you might encounter.

  • Specific practices: If you’re going to do landscaping, be prepared to respond when asked about the services you’ll offer. Each service poses a different set of risks. Your answers will help your agent know what you need and how much it will cost.
  • Projected income: To get insurance for a business, you’ll need to know how much you expect to make. Determine your pricing, and then estimate how much work you’re likely to get in a year.
  • Experience level: To properly calibrate insurance for a business, the agent putting it together will need to know what level of success it can expect, and that’s often a result of how much experience the person starting the business has in the field.

How Much Does Small Business Insurance Coverage Cost?

Business insurance costs depend on many different variables, such as:

  • The size of your business
  • The location of your business
  • How many employees you have
  • Annual revenue/payroll
  • The services you offer
  • The insurance company you choose

This isn’t an exhausted list of the variables that may apply. For more accurate costs, check out each type of insurance. Even better, speak with an experienced insurance agent to help assess your business insurance needs and to get a quote. 

Get a Free Business Insurance Quote

Getting insurance for a business can seem like a daunting task, but we’re here to help. Give our specialists a call at 877-907-5267 for a quick, free quote or complete the form at the top of the page. Someone will connect with you soon!

Amazing! Fast with awesome customer service! Thank you!
Kristen Guthrie
This insurance purchase for my business was the most seamless phone encounter I have ever had in any phone purchase process bar none. Information was requested once and moved smoothly from one person to the next as we moved thru the purchase. Each person I dealt with was friendly, professional, and focused on determining my needs and the best way to match me up with the solution. Absolutely stellar!!!
Edward Green
Perfect, Fast, and outstanding service!!!
Sammi Thomas