Keep your business covered: Insurance

You can’t control every variable that impacts your business. But you can control some of the risk by purchasing insurance coverage to help cover your business risks.

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Published: February 18, 2011
Updated: October 07, 2014

As a business owner you're at risk every day. You're ultimately responsible for making the decisions that determine your success, but you can't control every variable that impacts your business. That's where your insurance plan comes in. You might think disaster won't strike, but according to the Institute for Business & Home Safety, at least 25% of businesses never reopen following a catastrophe. That doesn't have to be the case for your business. If you're looking for the key policies that offer the sound, foundational coverage your company needs, the Insurance Information Institute recommends the following four types of insurance:

PropertyProperty insurance compensates you if the property you use in your business is lost or damaged as the result of various types of unfortunate events such as fire or theft. It covers not only a building or structure but also business property such as office furnishings, inventory, raw materials, machinery, computers, and other items vital to your business operations. Coverage can also be obtained for loss of income from business interruption. It protects more than your physical assets and may also provide operating funds during a period when you're trying to get the business back on track after a catastrophic loss.

"At least 25% of businesses never reopen following a catastrophe."

Liability — Any business can be sued. People may claim your business caused them harm as the result of a defective product, an error in a service, or disregard for another person's property. Or someone may allege you created a hazardous environment. Your liability insurance pays damages for which you are found liable, up to the policy limits, as well as attorneys' fees and other legal defense expenses. Medical payment insurance may pay the medical bills of anyone injured on your premises. 

Commercial autoIf you use your own car for business purposes, discuss this with your insurance agent. Many personal auto insurance policies exclude coverage if the vehicle involved in an accident is used mainly for business. A commercial auto policy provides coverage for vehicles owned or used by a business. The insurance pays any costs to third parties resulting from bodily injury or property damage for which your business is legally liable, up to the policy limits.

Workers' compensation — In every state but Texas, an employer must have workers' compensation insurance when there are more than a certain number of employees. That number varies from state to state with some states requiring coverage for as little as one to four employees. Workers' compensation insurance pays for medical care and replaces a portion of lost wages for an employee who is injured in the course of employment, regardless of who was at fault. The policy may also provide compensation to an employee's family if they die as a result of injuries sustained while working. 

You also might want to consider a business owners policy (BOP) which combines coverage for all major property and liability insurance risks and a range of additional coverage into one package policy suitable for smaller businesses. Depending on the type of business you own, additional coverage may be appropriate such as an umbrella policy, business interruption insurance, business property insurance, and a specialized liability policy. The one thing you don't want to be is underinsured, so talk to your insurance agent about the coverage that makes sense for your business.

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