Business insurance can seem tricky and difficult to navigate when you first encounter it. However, access to the right information and guidance will help you steer through the maze and grab the best coverage.
When I first started my career as an insurance lawyer for small firms, explaining the complexities of business insurance to clients was a huge challenge. However, the last 14 years of helping businesses as a lawyer and risk manager have helped me communicate the nuances better. Today, I continue helping companies as an insurance consultant while also securing the ideal insurance plans for my own businesses.
If you’re a business owner looking to seek the best commercial insurance plans for your company, here’s all you need to know!
Understanding Business Insurance
First, let’s break down what business insurance truly means and how you should understand it.
Business insurance (sometimes called commercial insurance) is a coverage or set of coverages that secures and provides safeguards from business-related losses or risks caused by unexpected incidents, accidents, or developments.
For instance, an employee sustaining injuries while operating heavy machinery, an unexpected fire breaking out and destroying property, or a disgruntled customer filing a lawsuit, etc. all require money to resolve. The right business insurance can offset these costs and leave you unscathed financially when these problems appear.
As you can imagine, these are all very different ways your business can face problems and incur losses. Naturally, business insurance also comes in different categories depending on the type of risk or loss expected.
Business Insurance: The Different Types and the Right Choice
I’ll take you through a quick overview of common business insurance categories that exist and where they fit into your insurance needs.
General Liability
This one’s your basic bread-and-butter plan when it comes to affordable business insurance plans.
A general liability plan will cover the costs of losses incurred by people or entities other than your business and employees. For instance, injury caused to a visitor by one of your machines or damage caused to someone’s car at your facility are examples of where this plan might kick in.
Business Property Insurance
Commercial property insurance will offer coverage for damage to your business property caused by different categories of accidents.
For instance, water damage caused by bursting or leaking pipes at your facility, vandalism by miscreants, damage by mobs or civil disturbances around your area, unexpected break out of fires, etc.
Note that common property insurance plans do not cover damages caused by specific natural disasters like floods or earthquakes (especially if you live in areas prone to such disasters).
Workers Compensation
Most local and federal governments impose compliance on companies and employers to offer insurance assistance to employees. Workers’ compensation plans come to the rescue if you’re an employer at a loss for such plans.
These insurance programs provide financial help to employees who may undergo unexpected medical treatments and procedures.
Some plans even offer compensation for wages when such employees are unable to work owing to medical procedures. Funeral costs, recovery costs, rehabilitation costs, etc. are other components that can come under these insurance plans.
Business Auto Insurance
Most personal auto insurance plans do not include coverage for accidents or mishaps encountered while driving company-owned cars. So, securing commercial auto insurance can help cut expenses during such incidents.
Note that these plans remain more relevant to companies or employees who drive around in company-owned cars. But they come to good use if such employees incur or cause damage and bodily harm to others on the road.
Data Breach Insurance
With the world moving towards big data and information, business owners may benefit by securing a robust data breach insurance program.
These plans help pay for remedial measures when your company encounters data theft or data-related crimes/damages. Informing customers, employees and affected users also costs money whenever data breaches take place.
Business Income Insurance
Some business disruptions and incidents can put a stop to your company’s income. However, your running costs continue accruing because you still use your equipment, machinery, rented items, etc. to keep the business running.
Commercial income insurance will help pay for utility bills, payroll, or other recurring costs required to keep your business afloat.
Business Owners Policy
A business owner’s policy insurance is like an enhanced version of your professional liability plan with components of many other insurance plans. Business owners avoiding the hassle of a dozen different insurance plans but want maximum coverage on different aspects of business can opt for this plan.
A BOP plan may include professional liability, property coverage, health insurance, employee and income coverage, etc. The main advantage here is that you get a versatile array of coverage programs under a single plan. The trade-off is that it won’t cover each area as extensively as a dedicated insurance program.
Insider Tips to Remember When Seeking Business Insurance
- Study the business risks faced by your company or establishment. This evaluation will help you choose the right commercial insurance plan. For instance, a warehouse will face higher property and equipment insurance, while a restaurant may face a higher risk of insurance costs caused by food contamination or poor service.
- Learn the legal compliances in your state of industry to differentiate between mandatory and optional insurance plans (Don’t jump on everyone else’s bandwagon).
- Your location and type of business will determine insurance costs substantially. For instance, an area prone to hurricanes and thunderstorms may incur higher premiums for protection against such hazards.
- Keep your claims history clean and minimal. For example, an advertising agency with a long history of legal accusations about false advertising may invite higher costs in professional insurance plans.
- I always break down the specifics of available Business Owners’ Policies to my clients. That’s because BOP coverage plans differ according to location and industry. For instance, check if your BOP provides better coverage for property or higher coverage for income before choosing a plan.
Closing Note
Business insurance appears confusing and demanding at first. But as I tell my clients, correct understanding and accurate information clear up the muddle that many employers face.
Learn about your industry, understand the coverage limits of your plans, and compare providers continuously to land the ideal commercial insurance provider for your business.
