Types of Insurance
Insurance is a way to transfer the risk of a loss from one party to another. For example, if your business were to suffer some type of loss that exceeds your income or assets, then an insurer would pay you a benefit in return for a premium.
While it’s true that all businesses need insurance coverage, some types are more essential than others for specific industries. Here are the most important types of insurance every business needs.
Types of Insurance Every Business Needs
1. General Liability Insurance
General liability insurance pays damages and legal costs when customers or clients file lawsuits against your business over bodily injuries caused by defective products or accidents on your property.
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In addition to protecting you from third-party claims, general liability insurance will protect you against claims filed by employees.
Here’s a quick guide to choosing the right general liability coverage:
What should I look for when buying general liability insurance?
Location: Think about where your business is located and if that could affect premiums.
For example, if you run a pet grooming shop in an area with high crime rates, then your premiums will be higher than they would be for an identical grooming shop in a low-crime area.
Other factors such as whether you operate out of a storefront or from home can make a difference as well.
Size of Business: The number of employees and yearly revenue both plays into determining premiums on general liability insurance policies. Larger businesses usually pay more than smaller ones because they’re at greater risk for lawsuits.
2. Property Insurance
Property insurance covers physical damage to your business’s property. Property insurance is typically broken up into two separate policies: building coverage and content coverage.
If you own a large office complex, for example, then you’ll want to make sure that both the buildings and everything inside are covered by an adequate policy.
These 2 policies may be included in one all-inclusive policy or they may be issued as two separate ones; it depends on what your insurer offers. Here are some things to consider when it comes to these 2 types of property insurance:
3. Automobile Insurance
This type of insurance covers vehicles you use for business purposes such as your delivery truck or company cars. It is unlikely that a standard auto insurance policy will be enough to cover these items, though. Because they require special coverage. Talk to an agent about what is required as far as liability and physical damage (comprehensive and collision). Here are some things to consider:
How much coverage do you need? Remember that if someone is injured in an accident caused by your vehicle and they file a claim against you, then your insurer might not pay more than the limits on your policy. Make sure that the total amount of your assets doesn’t surpass this number to prevent future financial problems.
4. Workers’ Compensation Insurance
If you have employees, this type of insurance is vital because it provides necessary medical coverage to workers who are injured on the job. Even if your industry isn’t classified as hazardous, you still may need workers’ compensation. This depends on where your business is located; every state has its own requirements for employers.
Here are some things to consider:
State Requirements: Regulations vary by state so check with your local chamber of commerce or department of labor for details. You’ll also want to see what discounts you can receive based on safety programs and loss-prevention efforts implemented in your workplace. The classification of certain types of workers such as independent contractors can affect premiums.
5. Professional Liability Insurance
This is also known as errors and omissions (E&O) insurance and it protects you from claims filed by your clients, patients, donors, and other business associates.
Even if you’re a small-business owner who doesn’t hire consultants or issue formal reports to people, this type of policy still has you covered because it covers the potential mistakes that happen during everyday operations such as misplacing an invoice or sending incorrect information via email.
Here are some things to consider:
Number of Clients: If you work with different types of professionals, then the risk for E&O claims is higher than if you work with non-licensed individuals.
Industry Type: If your business deals with medical/healthcare claims or the release of private information, then you’re at a higher risk for E&O lawsuits than other types of practices.
6. Property Insurance Deductibles
When it comes to property type of insurance, the deductible is the amount that you must pay yourself before an insurer pays a claim.
For example, if your policy dictates that your deductible and someone slips on the ice in front of your store, resulting in broken bones and hospital bills, then the payments will come out of your pocket first.
The good news is that many carriers offer “no-deductible” policies that help to lower costs, but you have lost the chance to self-insure.
It is important to consider this before signing on with a carrier.
Here are some things to keep in mind:
What’s covered?
Look at the language of the policy because it will affect how much you pay if something happens. Will you have to pay for damages or replacements?
The claims history is important because it determines whether there are any claims currently being paid on your behalf.
If there are no claims, then expect premiums to be higher compared to those who suffer losses due to problems that arise before they can take precautions.
7. Commercial Property Insurance Deductibles
You’ll find that these types of policies also include a deductible – the same as those provided to homeowners – and each one is unique due to different requirements by carriers.
If you own a P&C agency, for example, then you might want to consider taking on higher deductibles because it could reduce your premiums by up to 40%.
In fact, high net worth individuals often choose this option when they’re seeking comprehensive coverage.
