While you can't avoid all business risks you can reduce the costs of potential losses. Business insurance is one way to mitigate business losses. It allows for a financial recovery if an insurance policy is in effect related to a covered business failure or accident.
1. General Liability Insurance
General liability insurance is as its name suggests, the most general type of business insurance. Liability insurance protects the assets of a business when faced with allegations of causing injury or loss to person or property. The coverage offered in a general liability business owner's policy (BOP) will vary by insurance company but general bundles the most basic and least expensive property and liability insurance risks.
2. Commercial Property Insurance
A commercial property insurance policy covers losses sustained to commercial real estate. For instance, if anything were to happen to a building covered by such a policy the insurance company would reimburse the owner from losses to the building due to occurrences such as fires or storms.
3. Business Content Insurance
Generally, business content insurance is sold as a separate policy option from commercial property insurance. It is typically secured by a business that leases commercial real estate property, such as retailers, distributors and wholesalers. This type of insurance policy covers damages to the content of a building due to such events as a fire or burst water pipe. Covered content may include inventory, equipment, supplies and business documents.
4. Business Interruption Insurance
Business interruption insurance covers the expenses incurred when business continuity is interrupted. That means that the business enterprise must shut down for a time due to some unforeseeable event makes operating on business premises impossible. This type of insurance coverage may cover the cost of temporary or permanent relocation costs. Business interruption insurance is also known as business income coverage as it may cover loss business income due to the interruption.
5. Workers' Compensation Insurance
Workers' compensation is described by Legal Problem Solver: A Quick-and-Easy Action Guide to the Law as “a system set up in every state to provide money awards to employees or their families when a worker is injured, becomes ill, or dies from a work-related activity.”
Workers' compensation insurance is a state-mandated, "no-fault" insurance system that operates under the workers' compensation laws specific to each state. These state laws determine when a business needs workers compensation insurance and which employees are covered. State laws also set penalties for not having workers' compensation insurance when required.
6. Business Automobile Insurance
Commercial auto insurance is required for all vehicles owned and operated by a company. Businesses reduce their company's risk exposure by purchasing a commercial auto insurance policy. Auto insurance policies pay the cost of settled or litigated damage claims from injuries alleged to have occurred from an employee (the firm's agent) using the vehicle within the scope of his or her business duties.
7. Professional Indemnity Insurance
Professional indemnity insurance covers a claim that alleges a loss due to professional negligence that may be due to a mistake, error or bad counsel or service. Like other insurances, insurance policy payments may be made up to the policy limits under a settlement agreement or from a successful judgment by a plaintiff.
There are several types of professional indemnity insurance, including errors and omissions, malpractice and professional liability. Professionals such as doctors and lawyers typically seek coverage under these types of indemnity policies.
8. Key Person Insurance
Key person insurance is a risk coverage that protects a firm from the economic loss due to the death or disability of an indispensable employee. This usually is an owner, central manager or executive officer. The insurance coverage may help to cover the cost or replacing the key member and is generally held by the business entity or business partners. It is also called key man insurance or key employee insurance.
9. Group Health and Life Insurance
Although state and federal laws regulate health plans, there is no federal law or state law that requires employers to offer general health-care or medical benefits to employees. In the United States, however, it has become a common practice for a company seeking to attract the best employees to sponsor some form of group health and life insurance benefits as a competitive business practice.
Listed here in no particular order of importance is a brief review of nine types of business, commercial and professional insurances for a firm to consider. Consult with an insurance agent to learn more detail about these business insurance options.
Reference: Legal Problem Solver: A Quick-and-Easy Action Guide to the Law, Reader's Digest editors, (1994)
General Disclaimer: this article is for informational purposes only and should not be used as a substitute for legal or tax advice.
Vanessa Cross - Vanessa Cross is a freelance writer who writes about international trade, business law and small business development issues.
