Establishing and running a business are among the riskiest ventures. Protect yourself financially against potential disaster by choosing the appropriate small business insurance plan.
Acquaint yourself with the basics of business insurance by familiarizing yourself with your state’s requirements, then consult a broker or agent specializing in small business policies to obtain more in-depth advice and solicit quotes from insurers.
General Liability
General liability (CGL) coverage protects your business in the event that someone alleges your company caused bodily injury or property damage, such as medical costs and legal fees in case someone slips and falls in your store, or one of your employees accidentally damages a client’s outdoor sculpture during landscaping services.
Though not required by law in most states, many small businesses purchase liability policies to satisfy lease or loan agreements or meet contract stipulations from larger clients. Such protection could mean the difference between staying open or shutting down if your company is sued.
As well as covering injuries that happen on their premises, general liability policies often cover products liability, personal and advertising injury coverage as well as legal expense coverage. Many clients and landlords require businesses to carry this policy when renting space, operating certain industries or getting licenses.
While workers’ compensation covers your employees should they become injured on the job, general liability does not extend its protections to your personal or physical assets. Instead, separate policies are available or you could obtain business owner’s policy (BOP). Usually tax deductible premiums for general liability policies exist; it would be wise to consult a tax professional regarding your unique circumstances before making this decision.
Commercial Auto
In most states, any vehicle used to conduct business requires commercial auto insurance. Personal car policies don’t typically provide sufficient coverage, and your employees’ personal auto policies might not offer enough. Furthermore, many companies need hired and non-owned auto (BACF) coverage if vehicles rented or borrowed are being used exclusively for work-related activities – in these instances hired and non-owned auto (BACF) coverage will likely be necessary as well.
Liability and physical damage coverages typically feature in these policies. Liability provides coverage for bodily injuries to others and property damage with limits up to $1 million per accident; physical damage coverages include collision, specified perils, comprehensive, etc. Furthermore, some states impose additional requirements for certain vehicle types like taxis and commercial livery services (Uber and Lyft).
Commercial auto insurance policies may be thought of in terms of trucks and more well-known work vehicles, but commercial coverage for box trucks, food trucks, service utility vehicles and cars owned or used for business can also require this coverage. Sometimes this policy is required by law if an employee gets involved in an accident and not having adequate commercial auto coverage could result in fines, lawsuits and lost revenue; being aware of state requirements is important so brokers and agents can assist their clients make wise coverage decisions; IRMI offers state-specific tools and resources for this.
Business Owner’s Policy (BOP)
BOPs, designed for low-risk businesses like retail stores, barber or beauty salons, fitness centers and some contractors, offer bundles of at least two essential policies designed specifically to cover small enterprises. Combining general liability, commercial property and business interruption coverage into one comprehensive policy often offers more reasonable premiums than purchasing them individually. General liability protects your business against third-party bodily injury claims from customers slipping and falling in your store, while commercial property insurance covers your building or leased space, equipment and inventory. Business interruption coverage compensates if fire, theft or another event renders your premises unusable so you can afford temporary relocation while keeping business operations going.
Your provider may offer additional coverages as endorsements to a BOP policy, such as inland marine insurance to protect movable property that’s not permanently attached, pollution cleanup coverage and crime coverage – it is essential that you know what’s included and excluded, since if any risks arise which aren’t protected, additional coverage might be necessary to provide sufficient protection.
Although BOPs provide essential business insurance benefits, it’s essential to also consider other coverages like workers’ comp, professional liability, commercial auto and data breach insurance when developing and expanding your business. By carefully evaluating risks and procuring adequate protection through insurance coverages such as these, your business can continue its journey towards its goals more confidently and reach success more easily.
Workers’ Compensation
As one of the key forms of business insurance, nearly every state mandates workers’ compensation coverage for businesses. This coverage pays out medical expenses and a percentage of lost wages should an employee become injured on the job; additionally it serves as a safety net if one dies while at work. Furthermore, workers’ comp protects a business against being sued by injured workers by covering medical costs as well as payments.
State laws stipulate when and why businesses must carry workers’ comp, with penalties for failing to do so ranging from fines for each day they go without coverage to an injunction that prevents operations until the proper policies have been acquired.
There are four states which prohibit businesses from purchasing workers’ comp insurance through private insurers, instead requiring them to buy it directly from a state fund. This system, known as monopolistic workers’ comp, means businesses cannot shop around to find the most cost-effective premiums; additionally employees who do not receive coverage can still file suit against the business for income loss due to being unprotected; sole proprietors and partners in partnerships can choose whether or not they wish to opt-out of coverage altogether.
