Even before the product is sold, the moment you open a business, you’re at risk. Lawsuits can come from the most unlikely sources, and disasters bring down your supply chain. Events like this can put a company out of business before it has a chance to grow. However, business owners have a variety of insurance solutions to protect themselves. Here are the different types of business insurance every company should have.
#1. Home Business Insurance
Do I need business insurance from home? Many small businesses begin at home from a garage or office. But homeowner policies don’t cover business expenses the way a commercial policy would. If you’re running a business out of your home, you may need a separate policy to cover equipment like furniture, computers, and printers, professional tools and equipment, and stored products. If you’re a therapist or other professional who sees clients at home, you may need additional coverage to protect yourself against damages that may not be covered by your homeowner policy.
#2. Liability Insurance
Professional liability insurance protects a company against legal claims arising from harm caused by negligence. Each industry has particular types of insurance for business that can be written into a customized policy. The basic level of policy is Public & Products Liability which protects you from legal claims involving physical injury or property damage resulting from your business practices.
Certain professions might need extra coverage called Professional Indemnity for offering bad advice, or withholding good advice, such as a plumber getting sued for failure to mention lead pipes that violate building codes. There are a number of specific liability insurances needed for small business.
#3. Property Insurance
This is vital for businesses that have valuable physical assets to protect, such as equipment, structures, inventory, furniture, and so forth. Insurance will help cover replacement costs, depending on the policy, in the event of fire, storms, theft, or vandalism. Natural disasters like earthquakes or floods are generally not covered by standard policies but require special coverage in areas prone to such events.
If you own a warehouse, you’ll want both it and the product or materials you’ve stored there to be covered by insurance. Business property insurance is usually much more customized than homeowner property insurance. It may involve separate valuations for theft, machinery breakdown, or electronic failure. Some insurers may only cover items that have a minimum value of, say, $2,000 or more.
#4. Workers’ Compensation Insurance
If you have even one employee, worker’s compensation coverage should be added to your business insurance. In the event that one of your employees is hurt or killed as a result of work, this insurance covers medical expenses, disability, or death benefits. Even employees in low-risk jobs may be prone to conditions like carpal tunnel syndrome, or fall down a flight of stairs. Even if you are your only employee, you might want some coverage in case you’re injured and can’t run the business.
Some things to be mindful of in the policy are benefit payouts, length of coverage, pre-existing conditions, and stipulations on medical treatment or checkups. If you might need more comprehensive insurance for longer benefit periods or pre-existing conditions, such as arthritis, that were made worse, ask your insurance agent about extending coverage and how it will affect payment of premiums.
#5. Product Liability Insurance
If you are in the business of manufacturing and selling products, even something as simple as candles or dog biscuits, you should consider product liability insurance as soon as possible. Companies that have strict quality control measures, warning labels, and exceed federal guidelines are not immune from lawsuits in the event that someone is harmed by use of your product, even if they are using it incorrectly or negligently. A loose component swallowed by a child, or a toxic ingredient could lead to huge lawsuits that send you into bankruptcy.
#6. Vehicle Insurance
Every driver on the road is required by law to have it so that others are protected, and every company vehicle has to have it, as well. Should there be damage caused through the faulty operation or maintenance of one of your vehicles, you could be subject to damages, lawsuits, and other costs. Basic vehicle coverage provides for damage to others in the event of an accident, but most companies will also want coverage for their own vehicles to mitigate repair or replacement costs. Many insurers also have fleet coverage, which allows you to add or remove vehicles from a single policy covering all of them.
If employees are using their own vehicles as part of their job, they should be covered against damages to 3rd parties by their own vehicle insurance. However, if this is considered a Commercial Vehicle used in delivering products or services, or due to adding accessories such as signs or tool racks, coverage will be different. An employee delivering pizzas with a sign on the roof may be considered a commercial vehicle while on duty. Insurance coverage may have certain restrictions such as age, license restrictions, and vehicle capacity. Optional types of insurance for business may also cover lost profits or goods due to accidents or mechanical breakdowns.
#7. Business Interruption
Business operations – and profits – may be interrupted due to a significant event such as a chemical spill or structural failure. This type of insurance can compensate a company for lost revenue during such periods when some or all employees cannot work and business cannot continue. If a claim has been filed against you as a result of such events, you may not be able to conduct business until the problem is repaired. Regulatory fines may be incurred, as well, which means you’re still paying, but not earning.
You should definitely sit down with your insurer or research with an online insurance brokerage to discuss exactly what you will or will not need.
You can avoid major financial setbacks under most conditions by having the different types of business insurance tailored to your business needs. Don’t forget insurance policies are a form of financial protection. Inadequate, missing, or unpaid policies could still leave you with a huge loss.
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