As a business owner, you want to ensure your venture grows and remains profitable for years to come. Unfortunately, while incorporating your company offers some personal asset protection, you are still vulnerable to damage and injury claims by customers, vendors, employees, and other third parties.
However, you can create an additional layer of protection for your company with business insurance. But, how do you know which policies to invest in? Read on to find out more about the many options available.
Understanding Your Business Insurance Options
Much like health insurance, there is a range of policy options that protect against different perils for your company. It’s essential to assess your liabilities fully, whether related to your industry or your business, before buying any coverage plan.
Check out this brief overview of the more common business insurance options that companies rely on to protect their best interests:
Many businesses first begin with a general liability policy to cover any damages they might cause to a third party. This is a basic level of coverage that addresses three categories of risk:
- Bodily injury
- Property damage
- Personal injury, including copyright infringement and slander/libel
Keep in mind this insurance doesn’t insure against damages caused to you or your staff members, just third parties.
If you offer professional services, such as accounting or architectural consulting, you could face severe consequences if you make a mistake that causes your clients’ financial harm. Professional liability coverage, also known as errors and omissions insurance, defends against these situations. These policies also cover attorney fees and court costs, including compensation awards to those suing you.
This coverage is often legally required for businesses that use a fleet to conduct company business. Commercial coverage is essential to protect not just your vehicle assets but also employees and guests riding in the car and any product you may be transporting. It can also prove helpful should your team member be at fault for a collision that injures others.
Another policy that is usually mandatory for most businesses is workers’ compensation coverage. Whether you are legally obliged to carry it depends on your state and the number of employees you have. Even if you don’t have to purchase one of these policies, you probably should. Should an employee get sick or hurt on the job, they will have quick access to necessary medical care, and their lost wages get covered too.
What happens if your deli loses power during a storm and all your food products spoil? Or, if a tornado rips the roof off of your warehouse where you repair farming equipment? You lose income when your business is interrupted by mother nature or other events. Business interruption coverage can replace lost revenue due to being shut down.
The latest trends in hacking and data breaches have many business owners concerned about protecting their customer data and their company should one of these events occur. Who is at fault when sensitive information like social security numbers and banking details get stolen? Customers will point their fingers at you first. Cyber policies pay for damages they suffer and help you recover from these attacks.
Whether you rent your warehouse or own your doctor’s office, ensuring you can rebuild after a fire or other destructive event is vital. When comparing commercial property insurance quotes, make sure to note what is or is not covered by the policy terms. Make sure the coverage you purchase is enough to completely reconstruct your premises in the case of destruction.
Business Owner’s Policy (BOP)
A BOP is one of the most frequently purchased insurance options for small businesses. By bundling multiple coverages into a more manageable and affordable policy, you can enjoy a more comprehensive approach to liability protection.
Typically, a BOP combines the following:
- General liability
- Commercial property
- Business interruption
Consider Your Deductibles and Policy Limits Carefully
Besides determining the policies needed to protect your business from liability adequately, you also have to decide what limits and deductibles it will carry. So before choosing a high deductible-low premium model, consider these factors first:
Can You Afford a Coverage Gap
It may be tempting to go with the minimum coverage limits, but what if you have a claim that exceeds this amount? Anything above your policy’s terms will come out of your own business funds. This could be a devastating blow to your company’s financial health. Is it worth the risk?
Choose an Affordable Deductible
When comparing commercial insurance costs, you also need to decide what deductible obligations you can afford. The lower this cost, the higher the premium. While you don’t need to choose the lowest option, go with an amount you know you could afford if ever necessary. This will ensure your coverage has the right level of affordability and protection without company assets making up a gap in protection.
Doing your research before you request quotes can prove extremely helpful in comparing your company’s specific coverage needs versus industry standards.
Choosing the right commercial insurance coverage for your business will be one of the most important decisions you’ll make. You want to protect your hard work and investment into your venture at a reasonable cost with maximum protection. To achieve this goal, take time to understand the liabilities your company will face will prove helpful when deciding what policies you need.