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Types of Business Insurance

Insurance coverage is available for every conceivable risk your business might face. Cost and amount of coverage of policies vary among insurers. You should discuss your specific business risks and the types of insurance available with your insurance agent or broker.

Your agency can advise you on the exact types of insurance you should consider purchasing. You can purchase them separately or buy them in a Business Owners Policy (BOP) package. Here are some of the most common types of insurance that small business owners buy:

General Liability Insurance. Business owners purchase general liability insurance to cover legal hassles due to accident, injuries and claims of negligence. These policies protect against payments as the result of bodily injury, property damage, medical expenses, libel, slander the cost of defending lawsuits, and settlement bonds or judgments required during an appeal procedure.

Business Interruption Insurance. Business Interruption Insurance is a form of insurance that many entrepreneurs overlook. This insurance can cover your lost income if a catastrophe or accident shuts your business down. It also covers the expenses you may incur while keeping your business going while your building is repaired or replaced. It also pays the cost of renting temporary space.

Coverage for Crimes. This is insurance for those crimes that are committed by an outside party. If a crime occurs and the criminal isn’t connected with your business, crime insurance covers the losses. Your policy should cover burglary and robbery, as well as other thefts and the loss or disappearance of property.

Employee Theft. A crime policy doesn’t provide the coverage you need to protect against a theft committed by an employee. That’s why you need an employee theft policy. It should cover embezzlement, as well as theft of money, securities, and other property. Coverage can vary with different insurance companies, so consult your agent or broker for specifics.

Product Liability Insurance. Companies that manufacture, wholesale, distribute, and retail a product may be liable for its safety. Product liability insurance protects against financial loss as result of a defect product that cause injury or bodily harm. The amount of insurance you should purchase depends on the products you sell or manufacture. A clothing store would have far less risk than a small appliance store, for example.

Professional Liability Insurance. Business owners providing services should consider having professional liability insurance (also known as errors and omissions insurance). This type of liability coverage protects your business against malpractice, errors, negligence in provision of services to your customers. Depending on your profession, you may be required by your state government to carry such a policy. For example, physicians are required to purchase malpractice insurance as condition of practicing in certain states.

Commercial Property Insurance. Property insurance covers everything related to the loss and damage of company property due to a wide-variety of events such as fire, smoke, wind and hail storms, civil disobedience, and vandalism. The definition of “property” is broad, and includes lost income, business interruption, buildings, computers, company papers and money.

Property insurance policies come in two basic forms: all-risk policies covering a wide-range of incidents and perils except those noted in the policy and peril-specific policies that cover losses from only those perils listed in the policy. Examples of peril-specific policies include fire, flood, crime, and business interruption insurance.

All-risk policies generally covers risk faced by the average small business, while peril-specific policies are usually purchased when there is high risk of peril in a certain area. Consult your insurance agent or broker about the type of business property insurance best suited for your small business.

Home-Based Business Insurance. Contrary to popular belief, homeowners’ insurance policies do not generally cover home-based business losses. Depending on risks to your business, you may add riders to your homeowners’ policy to cover normal business risks such as property damage. However, homeowner’s policies only go so far in covering home-based businesses and you may need to purchase additional policies to cover other risks, such as general and profession liability.

Workers Compensation Insurance. In Virginia, you are required to purchase this insurance if you have three or more employees. This insurance protects your employees if they suffer job-related injuries. The policy pays the medical bills and wage replacement for the employee who is injured on the job.

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