Choosing the Right Insurance to Protect Your Business
Business owners invest more than just cash in their companies. It takes time, sweat and lots of heart to maintain a company. Without proper insurance, though, unforeseen challenges could easily disrupt all you’ve worked so hard to build. Here’s what you need to know about business coverage, and which types of insurance might be right for you.
General commercial insurance
While not always required by state law, commercial insurance provides these important protections:
Business liability coverage
Liability insurance pays for losses or harm caused by or at your business, and breaks down into three main categories.
A general liability policy offers broad coverage for injuries, negligence and accidents.
Professional liability insurance protects service providers against malpractice, personal negligence and errors. In certain states, professionals such as doctors must carry this insurance, but it can also make sense for accountants, lawyers, estheticians and those in other careers where the possibility of causing financial or physical harm exists.
Businesses that produce, sell or distribute merchandise should also consider product liability insurance. If someone is injured due to product defect, these policies cover related expenses.
Business property coverage
Commercial property insurance protects against damages and loss caused by events such as storms, vandalism, smoke and fire. All-risk policies include a wide range of perils while peril-specific policies cover individual risks such as floods or hurricanes.
Those with home-based businesses should be aware that homeowners and renters policies typically exclude business claims. Although you may be able to purchase business damage riders, business property coverage may still be necessary and you’ll likely still need commercial insurance to cover company liability.
For company-owned vehicles, the need for the property and liability protections that commercial auto insurance provides is clear. What many business owners don’t realize is that using a personal vehicle for work may also necessitate commercial coverage. Personal auto policies generally exclude using the vehicle for livery purposes or making deliveries, for instance.
Business employer insurance
State laws often require businesses with employees to carry this coverage as well:
- Workers’ compensation insurance: This policy pays an employee’s medical expenses and some lost income for work-related injuries.
- Disability insurance: These plans are required in New York, New Jersey, Hawaii, California, Rhode Island and Puerto Rico, but are also available in other locations.
Businesses that hire employees generally must also pay a state unemployment insurance tax.
Do I really need all this insurance?
Virtually all business owners would be wise to purchase some commercial liability coverage. Ultimately, though, the amount of insurance needed is determined by your business’s location, structure and type of product or service provided. For example:
- A musical entertainment company likely won’t need professional liability coverage.
- A company located in an arid climate probably doesn’t need special flood insurance.
- A tutoring service doesn’t require product liability coverage.
- Businesses with no regular employees may not need workers’ compensation or disability insurance.
It’s always best to evaluate insurance needs with a professional advisor. Some insurers may offer a Business Owner’s Policy (BOP), which combines individual coverage types needed by a specific kind of business with the advantage of a bundling discount. Financial institutions can offer expert guidance to help you get comprehensive, competitively priced business coverage. With insurance protection taken care of, you can return your focus to your passion for taking care of business.
Contributed by: Roberta Pescow, NerdWallet
The insurance product or annuity is not a deposit or other obligation of, or guaranteed by, the bank or an affiliate of the bank and is not insured by the FDIC or any other agency of the US, the bank, or an affiliate of the bank. There may be investment risk associated with the product, including the possible loss of value.