To help protect many of the things that matter most to us in life, there is insurance. There are many kinds of insurance policies available, from health insurance to keep our minds and bodies in good shape to home insurance that offers protection in case something bad happens to the place we live.
Just like our houses, vehicles, and health, our businesses matter too. Any business owner, no matter what size the company, should consider insurance policy options to make certain that the business is protected in the event of a problem.
The most common types of insurance for businesses
There are an array of policy options that can help protect your business, and an insurance agent can lay out the many choices available. But there are three business insurance coverage options that are especially popular across both large and small businesses. Here is an overview:
Usually the very first type of business insurance coverage that comes to mind for a business owner is commercial property insurance. This insurance protects your physical business from a potential tragedy like a fire, or a crime like a robbery. Such incidents could result in you losing valuable inventory that needs to be replaced, or sustaining costly damage to the office where your employees work every day. Either way, a good property insurance policy will ensure you are paid back for those losses.
It is critical that you examine the fine print to see exactly what the commercial property insurance policy you are considering covers before signing it. You can’t make the assumption that it will automatically cover any kind of natural disaster or damage, as policies vary. So before signing, make sure you understand what will and won’t be covered, and if the policy doesn’t cover something that you think is very important, ask the insurance agent if that can be altered. If not, examine other options offered by different insurance companies.
Another very common type of commercial insurance is general liability insurance. This is the insurance policy that is designed to cover the classic case of a customer slipping and falling while inside your establishment. If somebody sustains some kind of bodily injury while on your premises, liability insurance ensures that you don’t have to take on the financial responsibility for any medical care or lawsuits that result.
You may also want to consider including professional liability insurance in your business insurance coverage policy. Professional liability insurance is designed to address problems that result from “errors and omissions,” which basically refers to a mistake (such as a clerical error) that a professional might accidentally make, but could cost a client a significant amount of money. Accountants, lawyers, and real estate professionals are among the many types of business owners that might benefit from professional liability insurance.
As with any business insurance coverage policy, the business owner must go through the liability policy carefully to see if there are any restrictions or exceptions to be concerned about. Ask the insurance agent every single little question you can come up with about liability coverage – you want to make sure there aren’t any gaping holes in your insurance policy!
Business interruption insurance
Business interruption insurance is also very worthy of consideration. While property damage and injuries are understandably worrying to business owners because of their cost, a business’s success is not only compromised by expenses – you also need to be making money! And sometimes unexpected situations occur where your business – and therefore your income – is interrupted.
Business interruption insurance is a type of commercial insurance meant to help you make up for lost income resulting from disasters and events beyond your control. This is most often a natural disaster like a fire or tornado. Typically, an add-on to a property insurance policy, or part of a more comprehensive business insurance plan, interruption insurance usually covers things like profits, operating expenses, taxes, and more.
One of the most dramatic examples of “business interruption” is the crisis that has resulted from the worldwide coronavirus pandemic. Many businesses have been forced to shut down due to health concerns, while others have suffered because customers are self-isolating and not making as many purchases. Would the financial loss incurred from this horrible situation be covered by business interruption insurance? It seems likely that most policies would specifically exclude a global pandemic because of its potential to bankrupt the insurance company. But this is precisely the sort of detail you should ask the insurance agent about before purchasing the policy, so you are clear on what is and is not covered.
Small business vs. large business
Commercial insurance needs are not necessarily the same for all businesses—small business insurance needs may be less cumbersome than those for larger businesses. For instance, some small businesses being run out of homes or coworking spaces may not need business insurance coverage like commercial property insurance or general liability insurance because there isn’t an actual storefront or office that could incur property damage or where a ‘slip and fall’ incident might happen.
Workers compensation insurance – which covers the company’s own employees in the event of bodily injury – is an important type of insurance that many businesses are mandated to carry. However, the rules around it vary by state. In Oklahoma, for example, a business has to purchase workers compensation if they have five or more employees who are not related by blood to the business owner. To be certain of their workers comp insurance responsibilities, an employer needs to consult the laws in their own state.
Insurance requirements in commercial leases
In addition to consulting local laws to confirm what kinds of insurance your business is required to have, you should also bear in mind when you sign a new lease for office space that it may come with specific insurance obligations. Certain commercial rental leases expect the tenant to pay for property insurance, so be aware of what your responsibilities are according to your rental agreement (a real estate agent can also help you with this).
Getting the best business insurance coverage to protect your business
An insurance agent will be able to give a business owner details on what business insurance coverage makes most sense for their specific business, whether it’s liability insurance, property insurance, business interruption insurance, workers compensation, or all of them. Furthermore, the insurance agent should also be able to spell out what coverage is necessary in a business owner’s particular state. Remember, though, that policies do vary and so it may be worth consulting multiple insurance companies to make sure you are getting the best deal with the most comprehensive coverage to fully protect your business.