Business insurance provides financial protection against risks such as lawsuits, property damage and loss of revenue. The policies that are best for you will depend on the type of business and your specific needs.
Commercial property, general Liability and Workers’ Compensation are the three most common types. You may also require business interruption insurance.
Business Owners Policy (BOP)
A BOP is a package that combines commercial property and general liability insurance into one policy. It’s usually cheaper than buying each policy separately. It’s a great option for small and mid-sized businesses that have basic coverage needs and low-risk profiles.
General liability protects businesses from lawsuits stemming out of injuries or property damage caused by your services or products. It also helps pay for legal expenses and damages if someone makes a false or defamatory claim about your company. Commercial property coverage covers your company’s buildings, business personal property or inventory, as well as the movable items you use in your work. You may also get additional coverages such as accounts receivables, debris removal, and income protection in case of a disaster forcing you to stop or slow down your business for a time.
The only types of insurance not included in a BOP are workers’ compensation and professional liability, which you can typically get through separate policies. You can also limit or add extra coverages.
Comparing quotes from your contractor insurance is important because the cost of BOPs depends on many factors. Consider factors such as the location of your business, its size, industry and claims history. To find out if you need a BOP, it’s best to speak to an experienced agent about your options.
General Liability
General liability, also called commercial general liability, is one of the most common types of business insurance. It protects your company from claims of bodily injuries, property damage, and advertising injury. This is a vital policy if you have employees or customers. It could cover medical bills or repair expenses in the event of an injury. This policy may also cover legal costs in the event of a lawsuit.
A slip and fall accident or another accident in your shop could cost you thousands of dollars. You might be liable for repairs to an item damaged by a customer while using your products. You may be held liable for a false advertising or copyright violation depending on your industry. You can use general liability to pay for these costs and maintain the reputation of your company.
Many business owners choose to buy this type of insurance separately or as part of a bundle. A business owner’s (BOP) policy is a cost-saving solution for businesses. It includes coverage such as commercial property insurance and workers’ compensation.
When you purchase business insurance, your premium will depend on a few factors, such as the location of your business, its crime rate and the number of insurance claims it has made in the past. You will also need to consider the annual amount of coverage you require. The higher your limit, the higher your cost.
Commercial Property Insurance
Whether you rent or own your commercial property, business property coverage can ease the burden of replacing and repairing expensive equipment. It protects a business against theft and other losses which could have a financial impact. Depending on the type of business and location, some assets that are not part of a building might be covered under this policy, such as company vehicles or mobile storage systems. This policy may also cover outdoor property such as satellite antennas or fences.
A business property insurance policy will usually pay for two types: actual cash values and replacement costs. ACV is calculated based on current market value for damaged property. This includes depreciation. Replacement cost is based on the amount of money it will take to replace the property with new, equivalent items. Some businesses prefer the former while others benefit from the latter, so it is important to understand these differences when selecting a policy.
Many businesses bundle business property insurance policies with other essential coverages, such as the business owner’s policy. A BOP is perfect for small business owners who have low-risk profiles, and only require basic protection. It combines business interruption, general liability, and business property insurance into a cost-effective package.
A broker-agent can help you implement strategies and tips to reduce the risk of loss, and lower your business insurance rates. For instance, installing fire safety features in your office can lower insurance costs, while implementing a security system can help prevent break-ins and theft. Some insurers offer loss-control services to their customers, which can be especially useful for higher-risk accounts requiring more substantial premiums.
Business Income Insurance
Business income coverage or BIL pays your company for lost revenue when your business is closed due to property damage. This is a great addition to your commercial insurance policy and will help you cover payroll, taxes and any other expenses if you can’t open your business.
This coverage is available as a separate insurance policy or an endorsement for your commercial property insurer. It covers financial losses incurred by your business as a result of the property damage and is typically limited to the actual loss sustained. Many policies include a “time element” that extends coverage for your loss of income up to the period of time you need to resume normal business operations following property damage.
You can also usually add an endorsement for utility services to your business interruption policy. This will extend your income loss to the duration of any disruptions due to the lack of basic utility service such as electric, water, or gas. You can also add a civil authority coverage that will extend your business interruption and extra expense coverage to include any financial losses resulting from restrictions by public or private entities restricting access to your premises.
Your premiums for this coverage can vary depending on your location, industry and business size. In general, premiums for large companies are higher than those of smaller businesses.
Workers’ Compensation
In many states, it is mandatory that businesses carry workers’ compensation coverage. This insurance provides medical care and partial wage replacement to employees who are injured while working. It also protects businesses from lawsuits related workplace accidents. This insurance aims to reduce the conflict over who’s responsible when an injured employee. It’s a “grand bargain” that employers and employees make: in exchange for a settlement guarantee for injuries sustained on the job, the employer agrees to not sue the employee.
This is not the same as general liability insurance or commercial auto coverage, which covers injuries and damages suffered by customers, suppliers, and other visitors to the business. For example, a vendor might sue a restaurant owner over a fall in the parking lot, or an employee might sue the business over an allergic reaction to cleaning chemicals.
Workers’ Compensation Explained
Most states have a standardized data coding system for workers’ compensation claims. This allows insurers the ability to collect data on the type of injury, how it occurred, as well as the cost of care, and partial wage replacement. The information also includes the details of the injured worker, such as their occupation, age and gender. The information is then used to create a classification system and rates for similar businesses in the state. Economic factors are then overlaid to create final rates for each class.
Although state law does not always require sole proprietors or partnerships to purchase workers’ compensation, it is still a good idea if you have employees other than yourself. This coverage can save the business from financial ruin should a serious accident or death occur. It can also protect your business from third party suits, like when a family member of an employee sues you over a workplace death.