A business owners policy (BOP) comprises all important property and liability…
Insurance policies are vital for any business as the consequences of a mishap can potentially lead to business closure. Having the right insurance plan offers protection to your business if it is affected by a covered loss.
Business insurance is often a requirement by law for certain types of business activities. Some contracts require your business to be insured, while certain kinds of insurance policies are needed for all businesses in most states. Here are some of the most important insurance policies for your business:
General Liability Insurance
General liability insurance takes into account claims related to bodily injury and property damage as a result of your company’s operations, products or services. It may also provide compensation if you are held responsible for damage to your landlord’s property. Here are the details of coverage provided by a general liability insurance policy:
Third Party Bodily Injury
This comes into play when a customer sustains an injury due to a slip or fall inside your business premises. The insurance policy can help cover their medical expenses.
Third Party Property Damage
You may cause damage to someone else’s property while you conduct business. This can be an actual property location or a belonging. This aspect of general liability insurance can take care of the repair or replacement costs in such a scenario.
Someone can sue your business on the basis of libel or slander in case an employee or yours says something negative about a competitor. General liability insurance can take care of the legal costs incurred to defend your company.
A lawsuit can be filed against your business in case of copyright infringement. For instance, a photographer may sue your company if you have used their picture in your ads without permission.
Tenant Legal Liability
This coverage takes into account the damage by a third party to the property that you have rented for your business. For example, a staff member accidentally breaks the door of your rented office premises. General liability insurance will covert the replacement costs in such a scenario.
Workers’ Compensation Insurance
Workers’ compensation insurance is designed to protect staff members by providing medical costs and disability, death, and rehabilitation benefits in case of injury or death at work. Premiums are determined on the basis of an employer’s payroll and the employees’ nature of work. Here is a look at the coverage details:
Workers’ compensation insurance takes into account the medical expenses of your employees in case of work-related injury or illness. This can include surgeries, emergency room visits, and prescriptions. For instance, if an electrician cuts their hand at a client’s home, this policy can take care of the medical bills.
If your employee sustains an injury or contracts an illness at work, this insurance policy can replace a part of their lost income. For example, a restaurant chef accidentally spills scalding water on her arm and is unable to work for 2 weeks as a result. In this case, workers’ compensation insurance can replace a part of missed income.
At times, work-related injuries or illnesses can be so serious that they require more than one treatment. In such a scenario, this insurance policy can compensate for ongoing costs, such as physical therapy.
Working conditions can, sometimes, make your employees vulnerable to harmful chemicals or allergens that may cause illness. As a result, an employee may fall ill. In this case, workers’ compensation insurance can pay for the medical treatment and ongoing care.
If a staff member passes away as a result of a work-related accident, workers’ compensation insurance pays for the funeral expenses and offers death benefits to your employee’s dependents.
At times, work-related injuries can be serious enough to temporarily or permanently disable your staff member. If you carry workers’ compensation insurance, your insurance provider can pay for the medical expenses of employees and replace a part of their missed income.
Work-related injuries do not always occur due to a single incident. Repetitive injuries, such as carpal tunnel syndrome, may take years to advance. Workers’ compensation insurance can pay for the treatment and ongoing expenses.
See also: Workers’ Compensation Insurance
Commercial Property Insurance
Commercial property insurance policies take into account the costs incurred as a result of perils like theft, fire and natural disaster. It takes into account both the interior and exterior aspects of a building, including:
- Exterior signs
- Fence and landscaping
- Furniture and equipment
- Important documents
- Property belonging to a third party
The cost of a commercial property insurance policy depends upon different factors, such as:
If your business premises is located in a city or town with good fire protection, the cost of insurance is likely to be lesser for you. Moreover, if an area is rather prone to natural disasters, the cost of insurance may be high.
If your business premises has been constructed from potentially combustible materials, you may have to pay higher premiums. On the other hand, you may receive a discount if the building is made from fire-resistant materials.
The way a building is used has an influence on its fire rating. For instance, insurance cost for a restaurant is likely to be higher than that of an office. In case a building houses several tenants, even the presence of one hazardous occupant can have a negative impact on the fire rating of the entire building.
Fire and Theft Protection
The extent of protective measures you take against fire and theft can influence the cost of your commercial property insurance. For instance, if your business premises is equipped with a fire alarm and sprinkler system, you may enjoy lower premiums.
Errors and Omissions Insurance
Errors and omissions insurance, also called professional liability insurance, helps protect your business against lawsuits that claim you made an error in your professional services. This policy can pay for court costs and settlements, which can prove to be quite expensive for your company to pay on its own. Coverage of an errors and omissions insurance policy typically includes:
Work Mistakes and Oversights
Even a minor oversight or professional error on your part can cost your customer a substantial amount of money. To recover their losses, the client may file a lawsuit against your business.
If your company leaves work incomplete, it can interfere with your customer’s business plans. When you are unable to deliver services as promised, a client may file a lawsuit against your business.
Accusations of Negligence
While working with a customer, there is a possibility of your company failing to meet minimum industry standards. In this case, your client may sue your company on the grounds of negligence. A client can file a lawsuit even if they are simply dissatisfied with your performance.
If your business fails to meet a deadline, it may result in a delay in your client’s business plans and a consequent loss of revenue. In case a client sues your company due to late work, errors and omissions insurance can take care of the legal expenses.
Business Income Insurance
Business income insurance is a kind of property insurance that compensates for a company’s loss of income. It may be caused by temporary suspension or slowdown of business operations arising from damage to physical property. The covered causes of loss are:
The insurance policy can compensate for lost income in case of a theft. For instance, you own a computer store. After you close your shop for the day, thieves make their way in and steal expensive inventory.
As a consequence, you are forced to temporarily shut down your store while you replace your inventory. During this period, business income insurance can cover lost income.
In case of lost income due to fire, business income insurance can provide compensation. For example, your store is attached to a larger building. The shop next to you catches fire that spreads to your store.
As a consequence, you may have to temporarily suspend operations while you get the damage repaired. Business income insurance can pay for a part of the income lost during this time.
Business income insurance takes into account damage as a result of certain weather events. For instance, you run a sports equipment store. A hurricane hits your area and causes severe wind damage to your business premises.
As a result, you may need to halt operations temporarily to take care of damage repairs. Business income insurance can compensate for the loss of income during the period of restoration.
Commercial Auto Insurance Policy
Commercial auto insurance takes into account the expense of accidents involving business-owned vehicles. It also compensates for vandalism, theft and certain types of vehicle damage. The policy provides coverage for:
Auto Accident Liability
Commercial auto insurance encompasses liability coverage that compensates for damages in an accident where you are at fault. It can help pay for:
- Repair costs of the other person’s vehicle
- Legal expenses in case the other party sues you on the basis of their injuries
For example, an employee hits a sports car from the back while driving your business truck. In this case, a commercial auto insurance policy would take care of the cost of repairing the sports car. It can also pay for the other driver’s medical bills due to injuries sustained in the crash.
Commercial auto insurance takes into account medical expenses in case:
- You are injured in a vehicle accident
- Passengers in your car are injured in an accident
For example, a janitor meets with an accident while driving your company’s van to a customer’s office. While no one is severely injured, the janitor is transported to the hospital and prescribed x-rays. Your company’s business insurance policy can pay for the medical treatment as well as the ambulance ride.
Collision and Physical Damage
Insurance policies for collision and physical damage provide coverage in case of vehicle theft and physical damage, such as:
- Certain weather events
- Collision with other vehicles
For instance, a tree is uprooted due to a windstorm and damages your business truck. If you are carrying a commercial auto insurance policy, your insurance provider can pay to get the windshield replaced.
Accidents Involving Uninsured Motorists
When an accident is caused by an uninsured driver, they may not be able to pay for the damages. A commercial auto insurance policy ensures that your company does not have to bear the cost of medical treatment or vehicle repairs.
For example, an employee of yours is driving to a client’s house when another driver runs a stop sign and collides with a company car. In case the other driver is not insured adequately, your company’s commercial auto insurance policy can pay for the damages.
Cyber Liability Insurance
This insurance policy is created to provide comprehensive coverage to businesses that have become a victim to a cyberattack. This is typically a standalone policy, which consists of two main types of coverage:
First Party Coverages
This refers to the losses regarding the breach of your network, such as online theft, data destruction, extortion, and hacking. Coverage includes:
- Cost of repairing damaged or lost equipment
- Investigation costs
- Notification costs
- Lost revenue
- Credit monitoring or lost profits
Third Party Coverages
This coverage provides protection against lawsuits against your business that are related to a cyberattack. It compensates for claims filed against you, such as:
- Settlements and/or judgments
- Attorney fees
- Regulatory fines
Cyber liability insurance policies come into play when there is a data breach where client information is leaked. The policy takes care of the costs resulting from accusations regarding the failure of your company to protect important data.
Final Thoughts on Business Insurance Policies
Insurance policies provide your business with risk management against potential financial losses. They offer a sense of security and safety to you as a business owner. With the right policies, you will be able to concentrate on your business without worrying about financial setbacks due to unforeseen events.