A primary duty of the business owner or principal manager is protecting the company from risks that could destroy assets or burden the business with heavy expenses. One of the best ways to provide that protection is with business insurance coverage. In this article, we will review some of the types of business insurance policies that can protect business property, income and personnel.
General Liability Business Insurance
General liability insurance is one of the most common types of business insurance. It provides coverage for the business if someone is injured on company property, or if the operations or products of the business cause harm to someone or damage to the property.
Commercial general liability insurance also covers personal or advertising liability, as well as damage to property being rented by the business.
Professional Liability Business Insurance
Professional liability coverage, also known as Errors and Omissions (E&O) insurance, is essential for businesses that provide legal, financial and other professional services. This insurance protects the company from lawsuits that could arise from a covered mistake or negligence.
Business Property Insurance
Just as with homeowners’ insurance, business property insurance can cover damage to the buildings, equipment, inventory and personal property on the premises of the business, along with equipment breakdown and business interruption. Property insurance protects the business from risks such as fire, theft and storm damage.
Business Owner’s Policy (BOP)
Insurers often combine general liability and property coverage together in a business owners policy, or BOP. This type of coverage provides an all-in-one solution for damage to business property and inventory, as well as liability from potential customer injury and product claims.
A Business Owners Policy may also be offered with business interruption coverage, providing a convenient package of coverage for businesses such as retailers, builders and restaurants.
Cyber Liability Business Insurance
Today, most businesses rely on customer data to provide faster and better service, making them increasingly vulnerable to cyberattack. A data breach could be launched by a hacker to steal credit card numbers, to hold the business hostage in a ransomware attack, or simply to maliciously shut down the business.
Cyber liability insurance helps cover the cost of business interruption, settling liability claims, notifying customers, restoring data and dealing with fines or other expenses caused by cyberattack.
Comprehensive Crime Insurance
Various crime insurance offerings can cover losses due to forgery, alteration, theft, supplier collusion, electronic funds transfer fraud, misappropriation, securities fraud, embezzlement and accounting fraud.
Fidelity Bond Insurance
As with crime insurance, a fidelity bond protects the employee benefit plan against losses caused by acts of fraud or dishonesty such as forgery, embezzlement, misappropriation, wrongful abstraction, wrongful conversion, willful misapplication or theft.
Commercial Auto Insurance
A business that uses vehicles requires commercial auto insurance. This type of insurance provides coverage in the event of an accident involving vehicles owned or operated by the business, including damage to the vehicle itself, as well as injuries sustained by the driver or passengers.
Business auto insurance may also cover theft of the vehicle, as well as damage caused by a hail storm, flooding or other natural disaster.
Inland Marine Insurance
Inland marine insurance covers transportation over land, protecting the transport or warehousing of high-value equipment of the type that are usually excluded from conventional property insurance.
Inland marine insurance might be used for computers, communications and networking, construction equipment, medical and scientific equipment or photography equipment. The most common losses under inland marine insurance are cargo theft and transport collisions.
Directors and Officers Business Insurance
Directors and officers insurance, also known as D&O insurance, protects the board of directors and key officers of a business from lawsuits related to their actions taken or decisions made on behalf of the company.
Directors and officers insurance coverage pays for legal fees and settlements, and it protects the personal assets of directors and officers who may be personally sued while acting in their capacity as a manager.
Employment Practices Liability Insurance
Employment Practices Liability Insurance (EPLI) provides coverage for a lawsuit brought by an employee for discrimination, harassment, wrongful termination or other employment practices.
EPLI insurance covers legal fees and settlements that may result if such claims are upheld. In some cases, EPLI coverage can be added as an endorsement to an existing general liability or BOP policy.
Environmental Liability Insurance
Environmental insurance, sometimes known as pollution insurance, provides coverage for losses or damages resulting from accidental releases of pollutants that are normally excluded from coverage in general liability and property insurance policies.
Environmental liability insurance provides financial protection for claims against the insured that may arise from cleanup costs, business interruption, bodily injury and property damage.
Umbrella Business Insurance
Commercial umbrella insurance is used to provide additional coverage that may exceed the limits of certain liability policies of the business.
Workers’ Compensation Insurance
In most states, workers’ compensation insurance is required by law for businesses with employees. This insurance provides coverage for lost wages when an employee is injured on the job.
Workers’ compensation may also protect the business from a lawsuit filed by an injured employee. In some states, an employee who accepts workers’ compensation coverage may not bring suit against the business for a workplace injury.
Certification requires that the act was violent, was driven by the motive to coerce the citizens or government of the United States, and the act resulted in at least $100 million in damage. Terrorism policies exclude coverage for a nuclear, biological, chemical or radiological attack.
How to Choose Business Insurance Coverage
Before deciding on your total investment in business insurance coverage, take the time to (1) identify the potential risks, (2) develop a risk assessment, (3) put a price on potential losses, (4) balance risk and cost, and (5) talk it over with a professional.
1. Identify the Potential Risks
Read through this article again and consider whether many of the risks we describe even apply to the business you own or manage. This article is by no means the last word, so you may be aware of other serious risks that we have not mentioned. Use the real hazards as the yardstick.
2. Develop a Risk Assessment
Next, rank the risks by probability and severity. What are the possible risks? What is the probability that they might occur? And if they should occur, what would be the severity of the financial impacts?
3. Put a Price on Potential Losses
Develop a realistic value for the assets of the business. How long would it take to repair or replace the most important equipment? What is the average revenue that would have to be replaced if the business was shut down? Which expenses would have to be sustained until recovery?
4. Talk it Over with a Professional
An experienced agent can sort through the clutter and help you make the right coverage decisions. They want a long-term partnership with every client, so their objective is to strike the right balance between coverage and cost, giving you all the facts about coverage, premiums and available discounts.