What are the Different Types of Business Insurance?

What are the Different Types of Business Insurance?

Every business owner, no matter whether you have a startup or a multinational organization, needs insurance plans to cover the damages that occur due to calamities and any unforeseen events. A lot of things can hamper your business activity and make it difficult to conduct your routine business operations effectively. Buying the right type of business insurance will ensure that your business is running smoothly. The question is, how do you know which insurance policy your business needs?

There are dozens of plans, each serving different purposes. Choosing the right one will protect your business from events that can likely disturb your business function. That’s what we are going to help you with. We have listed different insurance policies that a business owner should consider, the level of coverage each plan offers, and how it can benefit your business. Let’s take a look.

 

General Liability Insurance

General liability insurance covers the cost of bodily injuries that occur to a worker or a visitor at your store and property damage to someone else’s property. If you interact directly with your customers, you need general liability insurance to mitigate the risk of a financial crisis due to a medical expense or a lawsuit filed by your customer.

Also read: Do I need business insurance if I’m a sole proprietor?

Let’s say a customer visits your store to buy products but falls into the lobby because of the slippery floor. They file a case against you in court and are awarded $10,000 for the bodily injury. If you have general liability insurance, your insurer will cover the medical expenses. Depending on your coverage, they might also cover legal expenses, such as court fees.

 

Worker’s Compensation Insurance

If you have heavy equipment and machinery that your workers are trained to work with, it’s important to get worker’s compensation insurance in case any mishap occurs in your office. A business is responsible for paying workers’ medical expenses if they get injured on-site or contract a disease while working. 

Having workers’ compensation insurance is a must to prevent the financial risks you might have to bear if a worker suffers any kind of injury at work. The insurance won’t just cover their medical expenses, but also pay for their salary for the days they couldn’t come to work. Most states in the US have made it mandatory for business owners to buy workers’ compensation insurance if they have employees.

 

Commercial Property Insurance

Any kind of damage to your office, equipment, or inventory due to natural or human-caused disasters will be covered by commercial property insurance. Every business that has inventory and equipment should consider getting commercial property insurance, as that’s the only effective way to save yourself from the loss you have incurred to theft or damage to your assets.

Also read: What Is a Businessowners Policy (BOP)?

The insurance will cover the cost of repair and replacement in case your machinery is heavily damaged due to fire or other causes. Not only that, but the policy also covers the lost income for the period you couldn’t use your office supplies.

 

Professional Liability Insurance

If you offer services to your clients, you must consider getting professional liability insurance. If any mistake occurs on your end and your client ends up suffering due to that, they can sue you for oversight in the service offered. The court can award them the financial loss they suffered, plus you will have to pay the legal fee. To manage all this, your professional liability insurer will compensate your client for the financial damage.

Let’s say you are in the healthcare business and the prescription medication you wrote for a patient resulted in an allergic reaction. The patient has to bear the additional cost of treatment. Having professional liability insurance will ensure that you don’t have to pay a single penny if they sue you.

 

Commercial Auto Insurance

Another important insurance that every business owner who owns a vehicle should consider is commercial auto insurance. The insurance comes in handy if your business vehicle that an employee uses for delivering goods or purchasing raw materials from the supplier gets into an accident.

The insurance policy will cover the cost of medical expenses your employee or the third party incurs due to bodily injury from the accident, as well as, it covers the cost of vehicle repair. It also covers any lost wages because of the accident. Commercial auto insurance is highly recommended for businesses that own food trucks, offer catering services, or any other delivery-related service that involves regular use of vehicles.

 

Business Owner’s Policy

BOP or Business Owner’s Policy combines three popular business insurance policies into a single package. It includes general liability insurance, workers’ compensation, and business interruption. We have already explained the two of these. Business interruption policy is used when you have to close your business for a brief period, either because of government regulation or an accident that led to property damage.

The policy covers the lost income during the closure period. In addition, it covers operational costs until your business reopens. For example, the insurance provider will pay your employees’ payroll, rent, lease, and any sort of operation expenses you incurred while your business was closed. Instead of buying these three policies separately, you can buy the bundled policies by signing up for the BOP.

 

Cyber Insurance

With the growing number of cybercrimes, it’s become important to take necessary precautions to prevent the risk of data breaches and any security violations that can affect your business’ reputation. With cyber insurance, you can claim the cost of the damage occurring due to security breaches, theft, and other cyber crimes. This covers ransomware attack payments, the cost of restoring the data, public relations required to fix the reputational damage, notifying customers about the security breach, and so on.

These were a few most crucial types of business insurance policies that every business owner should consider. These will mitigate the risk of the loss you might incur due to theft, vandalism, security breach, fire, bodily injury, property damage, and other damages to your business and employees.