If you're a business owner, it's hard to know the different types of business insurance you'll need. Here's a breakdown of the basics.
As a business owner, you probably don't spend a lot of time thinking about insurance policies. After all, from revenue to staffing to facilities management, you've got plenty on your mind already. But if you don't have the right types of business insurance in place, you may find much more to worry about in the event of an accident or other unforeseen circumstance.
It's risky to run a business without insurance, but it's also difficult to know which types of business insurance make the most sense for you. That sometimes leads to leaving insurance issues on the back burner, which can end up being costly—much more so than the relatively inexpensive premiums on many policies. In the end, taking a few minutes to understand your options and what best fits your business could save you thousands of dollars.
Five types of business insurance every business owner should know about
1. General liability insurance
The most essential policy you'll want for your business is a general liability policy. General liability covers claims and lawsuits that result from things like injuries and accidents that occur at your business, including slips and falls, which are one of the most common types of claims. It also covers things like slander and false advertisement as well as legal and medical bills. General liability is also a good idea because it includes rental properties, which means if damage occurs, you won't have to pay your landlord out-of-pocket.
2. Property insurance
If you operate your business in a commercial space, a commercial property policy can help protect your company in the event of damage sustained from fire, smoke, inclement weather, and vandalism, among other things. The definition of "property" varies, but it usually covers buildings, equipment, records, money, and any other physical thing owned or rented by your company. As far as types of business insurance go, this is another one you'll want to give some serious consideration to.
Each property policy is different, so make sure you get a complete list of what is and is not covered. If you work out of a home office, you can usually get similar coverage in addition to your homeowners policy.
3. Workers compensation insurance
Workers compensation insurance may be one of the better-known types of business insurance because, in most states, it's required by law. Even where it isn't, workers compensation insurance makes sense because it protects you from claims that may arise from within your company due to negligence. Workers compensation replaces income and helps pay for some medical bills in the event an employee is injured on the job. In exchange, the employee waives all rights to file a negligence claim against the employer.
Workers compensation can save you a lot of headaches that might arise from on-the-job injuries and therefore is highly recommended. If you'd rather opt-out, make sure you operate your business in a state where it's legal to do so.
4. Professional liability insurance
Professional liability insurance protects you from negligence and malpractice claims against you. This type of insurance is also known as "errors and omissions" insurance. Doctors and lawyers commonly carry this type of insurance (in some states, it's required by law for these professions), but it can be carried by anyone who provides a professional service to a customer. Auto mechanics, massage therapists, and social workers are just a few examples of other professions that might carry professional liability insurance. If you provide a service in which an error may result in personal injury to someone, you may want to consider this coverage.
5. Product liability insurance
Similarly, if your company makes a product, you are responsible for that product's safety. Car manufacturers, for example, would likely carry product liability insurance, as would a company that makes microwaves, toasters, curling irons, and other products where a defect may result in an unsafe situation. In the event a product is defective and that defect results in injury or bodily harm, product liability insurance would protect you from claims arising from such a situation.
There are other more specialized types of business insurance, like commercial auto insurance, that you would only carry under certain circumstances. (If your company doesn't use commercial vehicles, for example, it won't make sense to have that coverage.) Talk to your insurance agent about what other options would make sense for the type of business that you're running. You might also ask about umbrella policies, which often cover things that aren't covered by basic policies.
Not sure which insurance policy is right for you? Contact your Pekin Insurance agent today for help with all your business insurance needs.
Do you carry a certain type of business insurance you find to be essential? Tell us about it in the comments below.