Have you ever heard the old saying “plan for the worst but hope for the best?” Those are words to live by when it comes to making sure your business is sufficiently insured. A catastrophe of any kind, whether it’s destruction of your property or a vicious lawsuit, could run your business into the ground if you don’t have adequate insurance.
Here are the types of business insurance you may need, and some tips on how to make sure you’re more than covered.
Property insurance is a must for almost every business. It protects buildings, equipment, and tools that are necessary for the operation of your business against fire, burglary, theft, and storm-related damage. If your business is located in a high-risk area known for flooding or severe storms, additional property insurance may be necessary.
There are two different types of property insurance for businesses. The first type is known as “named perils” and it only covers specific hazards that are named in the policy. The second type is called “all-risk” and the only exclusions are listed within the policy itself. Never assume that if you have property insurance, you’re completely covered. Most policies have quite a few exclusions, so read it over carefully to make sure you understand what is covered, and make adjustments if necessary.
If you operate your business from home, you still need to have business property insurance. It’s a common misconception that a home owner’s property insurance policy will cover anything used for your business–it won’t. It’s essential that you purchase business property insurance even if you don’t leave home to go to work.
Can you afford to lose any business if you’re forced to shut down due to damaged property? If not, you may want to include business interruption coverage in your property insurance policy. It will reimburse you for any losses if you should need to temporarily close your business for up to one year.
Like property insurance, some sort of liability insurance is almost always needed if you have your own business. There are a few types of liability insurance available, and you may need more than one type depending on what kind of business you have. General liability insurance will protect your business in instances where another party is injured or killed as a direct result of your negligence. This could be due to a bad service or installation performed by either you or one of your employees, or even because of a product you sold to someone who caused some sort of bodily harm. General liability will cover any related damages including lawyer’s fees, medical bills, lost wages, and monetary settlements. Basically, if you have customers, you most likely need this insurance.
If you sell manufactured products, you may need to purchase additional coverage referred to as product liability. Likewise, if you perform services on clients, professional liability insurance is something you need to look into. Some occupations require that you carry professional liability insurance for cases of malpractice or any other error or negligence on your part when performing services. The need for professional liability coverage depends on what type of business you have, and may also be determined by what state you reside in. If there is any question as to whether or not you need product or professional liability policies, do not waste any time–find out right away by calling a representative of your insurance company.
Does your business require the use of a vehicle by either you or your employees? If the answer is yes, business automobile insurance is another type of coverage you need. Personal auto insurance policies do not usually cover automobiles used for work. A serious accident while on the job could put you on the edge of financial ruin, so check with your insurance agent to see what kind of coverage you need for business vehicles. Like personal automobile policies, different levels of coverage are available–it’s better to play it safe and get comprehensive coverage just to make sure you’re fully protected.
If you have any employees working for you, workers compensation insurance is a necessity. In the unfortunate event of a work-related accident that causes injury or even death to one of your employees, workers compensation insurance will cover the damages. Anything from medical bills to lost wages will be taken care of with this type of policy–so make sure your employees are protected.
It’s very important to thoroughly understand what your business insurance policies cover, and to ask your insurance agent if there’s anything you’re forgetting. A reputable insurance representative will know the ins and outs of business insurance, and be able to tell you if there is any other type of policy that is critical for the protection of your business. It’s always better to be safe than sorry, so take the time to read and understand your business insurance policies. Now is the time to find out if you have adequate business coverage–be sure you have what you need before you really need it.
Guest Andy Granger writes for the Business Insurance Guide.