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Most successful business owners are calculative risk-takers. They are well-aware of the financial investment and dedication that businesses require. They are willing to take the risk of investing their life’s savings into their business, but not blindly. They understand that from the very first day, a business is a huge risk.
Even before you hire your first staff, a business must have some sort of safety net to fall back on. Circumstances don’t always remain the same, things don’t always work out as planned, and uncertainties in life are inevitable. In such cases, a good business insurance policy will keep your business afloat and give you financial protection against unforeseeable events.
Now that we are almost through the first month of the year 2021, let’s find out why business insurance should be a part of your financial plans.
What is Business Insurance?
Business insurance coverages give business owners the protection and security from financial, material, or property losses that may result in case of unfortunate events and incidents. Business insurance is becoming increasingly popular, especially now that businesses have realized the importance of having a comprehensive business insurance policy. Due to the on-going Coronavirus pandemic, the economic meltdown, and business closures that followed as a result of it, companies now want their businesses to be insured so that the employers and employees remain financially secured during crises.
In the USA alone, there are now 1,009,663 finance and insurance companies that provide business insurance policies. The states of California, Texas, and Florida have the highest number of finance and insurance companies that are offering business insurance coverages to small and medium-sized companies as well as large conglomerates.
Do All Businesses in Florida Need Insurance?
The state law of Florida does not mandate business insurance for all the businesses operating in Florida. Having the business insured is entirely up to the business owner. However, for all the businesses that are operating from a physical location, it is important that the commercial property is insured, whether it has been rented or purchased, and the business has some sort of general liability coverage to protect the business from losing money in-case of property damage or income disruption.
It is important to note that the state of Florida’s economy is the 4th largest in the USA, and small businesses in Florida alone have employed 42% of the state’s workforce. Therefore, business insurance in Florida is of utmost importance especially since it includes workers’ compensation insurance.
Types of Business Insurance
There are several types of business insurance coverages, plans, and policies that are offered by insurance companies. While the names and specifications of these policies vary from state to state and company to company, they are generally in the category of:
As long as a business is operating from a physical location, like a store, office, or outlet, it is advisable that the commercial property should be insured. Even if the property has been rented on leased, most landowners would prefer that the commercial property is insured. In case of property damage, the business owner can file an insurance claim to pay for the damages. For instance, the property can catch fire, get damaged as a result of a robbery or acts of vandalism. Sometimes, business insurance companies even provide coverage for business properties in case of a thunderstorm or an explosion or demolition nearby that may cause damage to the commercial property.
In the property insurance, the business gets financial coverage for any harm that is caused to the property, the signage, the office or store equipment, furniture, inventory, and even the pavement outside. However, in case of events that cause major destruction like natural disasters (earthquake, floods, or tornadoes), or wars, the insurance company is not liable for the damages.
Often when people are applying for loans, mortgages, or credit cards, they are denied these financial services because of their low credit score. Banks are hesitant to accept the applications because of the person’s credit history and failure to make on-time payments along with interest.
In such cases, insurance companies take the responsibility of the applicant by making them purchase and sign surety bonds or a bonds insurance policy. This is a guarantee between the applicant, the insurance company, and the bondholder that the applicant will make all the payments on-time along with interest. In case of defaults, the insurance company pays the bondholders what the applicant owes them.
Bond insurance is also referred to as financial guaranty insurance. It has two major purposes – to reduce the interest rate on loans, credit cards, and mortgages and to increase the credit score of the applicant so that he can easily secure or a loan or a mortgage.
Businesses need an adequate amount of capital for the initial investment. Most often, people borrow money from banks and investors as business loans to kick start their business. Bonds insurance comes in handy as it improves the business owner’s credit score and attracts banks and investors. They know that even if the business incurs losses and the borrower defaults on his payments, the insurance company will pay back the debts.
The liability insurance policy gives the business protection from liability claims in case if a person gets injured as a result of business operations or at the business property. It also protects the business from the cost of lawsuits or repair in the case of damages done to someone else’s property. For example, if someone’s car was parked outside your store, and while installing the signage, there was an accident, and the signage fell on the parked car, a liability insurance claim can help you pay for the legal expenses and the damages.
There are three different types of liability insurances that businesses can apply for, depending on the nature of the business.
1) Product Liability
Businesses that are in the product manufacturing industry often consider getting product liability insurance. In case a business’ product is sued for being faulty, harmful, or life-threatening, the product liability insurance can pay for the legal costs as well as the medical costs for the consumers who might have been hospitalized as a result of using or consuming the product. The food and beverage industry is advised to purchase product liability insurance because the health risks are greater with these products.
2) Public Liability
Public liability insurance covers the cost of lawsuits in case a public claim is made against your business when a customer or passerby receives an injury, dies, or their property gets damaged. The public liability insurance will even help you to pay for the medical expenses of the injured or deceased person and monetarily compensate for the damage to the property. For example, consider that you are the owner of a store, and a customer who came to shop at your store received a serious head injury when a loose light fixture from the ceiling fell on her head. She had to be treated at the hospital for over a week, after which she filed a public claim against your business for negligence and lack of workplace safety. You will be required to defend yourself in the court, and in case the court orders you to pay for the medical expenses of the lady’s treatment at the hospital, your business will be burdened with this additional cost too. To save you from these legal and medical expenses, insurance companies offer public liability insurance within their general liability insurance policies.
3) Professional Liability
Professional liability insurance is also known as errors and omissions (E&O) insurance and is mostly used by businesses that offer legal advice or consultation services. Sometimes, it is also used by medical professionals. In case a claim was made by your business that turned out to be untrue or caused harm to the consumers, and they filed a lawsuit against your company for malpractice, the professional liability insurance will protect you from the lawsuits and legal costs.
Almost all the companies in the USA that have full-time staff purchase worker’s compensation insurance to give protection to their employees. In some states of the USA, like Florida, it is mandatory for businesses to have worker’s compensation insurance, and the failure to do so could result in fines, penalties, and legal notices.
In case the employee was injured or died while he was performing his duties at the company, the insurance company will pay for the medical expenses, death benefits, or disability claims. Even small accidents like tripping, slipping, or falling down are covered by the worker’s compensation insurance. Most worker’s compensation policies even include the payment of an employee’s daily wages for the number of days that he takes leave to recover from the injury or illness.
Any accidents or injuries that were caused while you or your employee was driving to perform a business-related activity will be covered by the commercial auto insurance policy. Regardless of whether it was a personal vehicle or a commercial vehicle (For e.g., a delivery truck), the commercial auto insurance claim will help you pay for the medical expenses and the repair costs for the damage done to your car and the car or property that your vehicle collided into. It is to be noted that if you are hiring the services of third-party delivery services or riders, the insurance policy will not cover any accidents caused by them because you are paying a fee to the company for their services, and therefore, the insurance policy is not applicable to the delivery personnel. Only you, your employees, and your personal or business vehicles are covered under this policy.
The equipment floaters insurance is generally bought by the construction companies. In case your business operations require the transportation of equipment from one place to another quite frequently, the equipment floaters insurance will provide coverage for your equipment and heavy machinery. Constant moving and transportation over long-distances or bad weather conditions can damage the equipment and heavy machinery. These machines and construction equipment are expensive and need time to be replaced. Having the equipment floaters insurance safeguards the company against financial losses, and in the case of the complete destruction of the equipment, the insurance company pays for the equipment replacement.
Business Interruption Insurance
The business interruption insurance policy is useful for businesses that operate from a physical location. When businesses face unexpected challenges like natural disasters, fires, or a building collapse that make the commercial property unfit for use and disrupt the business activity for a few weeks or months, the business interruption insurance policy helps to keep the business afloat. The insurance claim can be used to pay employees’ salaries, the maintenance cost of the commercial property, and other business-related expenses such as shifting to a temporary location. The business interruption insurance policy is mostly purchased by business owners who operate from a physical location like restaurants, stores, shops, and offices.
It is to be noted that none of the standard business interruption policies cover the loss of income or damage to business property as a result of pandemics. So, even though, during the first few months of the Coronavirus pandemic, many businesses were suddenly forced to shut down because of nationwide lockdowns, the business interruption insurance policy could not provide coverage for the loss of income.
Other Types of Coverages
There are several other types of business insurance coverages that ensure that businesses receive tailormade insurance services from insurance companies. These include:
Commercial Umbrella Insurance
Commercial umbrella insurance provides extra liability coverage for the business. For instance, if the current liability insurance claims are not sufficient to pay for the heavy legal and medical expenses that were incurred as a result of an injury, death, or damage caused by your business activities, then the commercial umbrella insurance policy will cover those expenses.
Cyber Liability Insurance
Cyber liability insurance is a useful policy plan for businesses that are offering products and services in the Information technology sector. It can protect your business from harm done by or damages caused by electronic hardware, data breaches, and computer systems. For example, if you created software for data management but it had minimal cybersecurity, and within a few days, hackers were able to hack the system and stole all the classified data. The company that purchased your software sued you and demanded that you pay for the damages. In such a case, the cyber liability insurance policy will pay for the legal fees and damages.
Equipment Breakdown Insurance
The equipment breakdown insurance provides coverage for all electronic devices, computers, and machines that have malfunctioned and need repair or replacement. In case of short circuits, fire, or power breakdowns that cause damage to the company’s equipment, the insurance company will reimburse your business if you have equipment breakdown insurance.
Business Income Insurance
The business income insurance policy comes in handy when your business has to close down temporarily due to direct property damage, but you still need capital to pay salaries, bills, and cover other business-related expenses.
Accounts Receivable Insurance
Many businesses deliver goods first and then collect the payments from retailers and customers. In the case when payments get delayed and businesses find it difficult to sustain, the accounts receivable insurance comes to aid. Even when the import and export permits get canceled suddenly because of the changes in government regulations, the accounts receivable insurance can cover the losses that the business may incur.
Summary on why business insurance should be a part of your financial plans
The stakes are always higher when you start your own business. Even flourishing businesses are well-aware that at some point, due to unexpected events, the tables might turn, and they may lose all that they have accomplished over the years. Risk-averse business owners always make business insurance a part of their financial plans to protect themselves and all the other stakeholders from financial losses. There are many types of business insurance policies and coverages that are tailormade to suit the specific needs of different types of industries.
If you are looking for a business insurance policy for your company, then you can contact us here at AC Insurance to find your comprehensive business insurance plan. You can give us a call at 561-683-2230 or click here to get a free insurance quote for your business.
Now that you know why business insurance should be a part of your financial plans, insure your business now to protect it from unfortunate events and unexpected financial losses.