Whether you’re getting ready to launch your first business or are a serial entrepreneur, it’s essential to understand your commercial insurance coverage. You might already know that some insurance policies, like Workers Compensation, are legally mandated but commercial insurance also works to make sure you, your employees, and your business assets are protected.
The right insurance coverage will save you time, money, and stress in the long run. With insurance, there is no one-size-fits-all policy so it pays to understand your coverage needs. And that often requires having more than one policy.
What is commercial insurance?
Commercial insurance protects your business and your employees against various risks that can happen at any time. For example, a customer might slip and fall inside your office, an employee may get sick or injured as a result of doing their job, your company vehicle may be involved in an accident, or a disgruntled client may file a lawsuit. With commercial insurance, you won’t have to worry about paying for damages or legal fees.
Why do small businesses need insurance?
Some policies are required by law. Nearly every state in the U.S requires businesses to carry insurance and some industries, like contractors or painters, require General Liability as a prerequisite to obtaining a license. Other policies, like Commercial Property, are often required if you want to lease an office or commercial space. And, Workers Compensation is often mandatory as soon as you add your first employee to your payroll.
In addition to state regulations, many business clients often require proof of insurance before they sign a contract. It will also help build your credibility so you can retain customers and attract new clients.
A single claim against your business can result in significant financial losses and damage your company’s reputation. Business insurance helps manage the damages that you would otherwise have to cover out of pocket. You can’t always control what will happen but you can mitigate your liability and secure your business assets with insurance.
What types of insurance do small businesses need?
For small businesses, generally speaking, it’s not enough to have just one policy. It’s essential to make sure that you are covered for the unique risk that you may face while running your business. Different types of insurance policies cater to specific business requirements. Here are several types of policies that small businesses should consider:
- General Liability insurance: This policy protects your business against claims associated with third-party bodily injury or property damage. For instance, it will cover the medical expenses and legal fees if a customer or client gets injured on your business’ property.
- Commercial Property insurance: This coverage protects the physical assets of your business such as office equipment and furniture in the event of an accident, like a fire.
Pro tip: You can bundle these two policies into a Business Owners Policy (BOP). This could save you time and money compared to buying two separate policies.
- Professional Liability insurance: Sometimes called Errors & Omissions (E&O) insurance, this policy protects you against claims associated with damages that can arise from providing professional advice to clients. It covers legal expenses in case of lawsuits filed by clients who have incurred losses or are not satisfied with your service.
This policy is especially important for financial advisors, lawyers, doctors, real estate agents, and other professionals who provide consultations or advice as part of their services.
- Commercial Auto insurance: This provides coverage for company-owned vehicles and even personal vehicles that are used for business purposes. Bear in mind that if your own car is involved in a road accident during business operations, your personal auto insurance will not be able to provide coverage.
- Worker’s Compensation insurance: If your employees get sick or injured as a result of doing their job, this policy will help pay for the medical and rehabilitation costs. It will also cover the salaries lost in case an employee needs time to recover and cannot go back to work. Keep in mind that this coverage is also required by law in most states.
Carrying the right insurance should be a priority for small business owners. It provides a strong sense of security and protects not only your financial stability but also your credibility. Having adequate coverage usually means carrying more than one policy to cover the different risks you face from your employees, customers, and other third-party damage.
Running a business is time-consuming, so make sure to work with a reputable broker who can provide you with real-time quotes from multiple carriers. Having numerous options to choose from will help you find the coverage you need at a price that fits your budget.
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. 1-800Accountant assumes no liability for actions taken in reliance upon the information contained herein.