8 TYPES OF BUSINESS INSURANCE YOU PROBABLY NEED (BUT DIDN’T THINK OF)

by Marko Csokasi


As a business owner, you invest a great deal of time, energy, and money into building a company you can be proud of. Natural disasters, fraud, theft, and accidental injuries can put your hard work at risk.


Business insurance is designed to help companies protect themselves and their assets from risks such as:

  • Lawsuits

  • Theft

  • Property damage

  • Employee injury or illness

Without this type of insurance, your business risks having to pay for these types of losses, which can be extremely costly. Without insurance protection, you are putting the future of your business at risk.


Insurance is important for ventures of all sizes, including small businesses. Read on to learn more about the most common types of business insurance you can purchase, including those that may be required by law.


8 MAIN TYPES OF BUSINESS INSURANCE COVERAGE


Unsure how to decide the necessary insurances to buy? Consider the nature of your business, your needs, the common risks you face, and which types of coverage are required in the state where your business was founded.


Some types of insurance, such as unemployment insurance, are required by nearly all businesses.


1. General Liability Insurance: Covers liability claims against your business, such as slip and fall accidents or false advertising claims. Most businesses that have a physical location should carry this type of coverage.


2. Workers’ Compensation Insurance: This type of coverage pays for medical care and a portion of lost wages when employees are injured on the job. It does not require establishing fault, and laws limit the amount that can be paid out. This policy is required in most states.


3. Disability Insurance: This covers a portion of lost income if an employee or business owner is unable to work for some time. This type of policy is not required by law but can be critical for business owners who handle much of the day-to-day operations of their business. Short-term disability can function as maternity leave coverage.


4. Unemployment Insurance: This policy is required by federal law for employers who pay more than $1500 in wages a quarter or have at least one employee for at least 20 weeks per year. It covers a portion of lost wages for employees who lose their jobs due to specific circumstances, such as being laid off.


5. Directors and Officers Insurance: Often called D&O, this is liability insurance designed to protect the personal assets of directors and officers of a company or non-profit in the event they are sued by any party regarding their management of or advising of the organization they work for or volunteer for.


6. Property, Homeowners’, and Renters’ Insurance: These policies generally cover the structure and items inside a building when damaged by theft, natural disasters, fire, or vandalism. While not legally required, it is important to protect items like inventory, electronic POS systems, and other items stored in your business.


7.  Professional Liability Insurance (E&O): A type of liability insurance that protects companies, businesses, and freelancers that offer advice or services. Claims might allege negligence, errors, or omission. Those who would benefit from this type of insurance include consultants, marketers, home services professionals, health professionals, tax preparers, lawyers, and wedding planners. It may also be referred to as Errors & Omissions Insurance, or professional indemnity insurance (PII).


8.  Product Liability Insurance: Protects companies that make goods from claims involving bodily injury or property damage. For example, if a company makes and sells an external battery that results in a fire that injures people and damages property. Companies that make, design, or manufacture goods should consider carrying this type of coverage.


FREQUENTLY ASKED QUESTIONS ABOUT BUSINESS INSURANCE


There are dozens of different business insurance types to choose from, and it can be overwhelming for anyone. Here are twelve FAQs that we hand-picked just for small businesses.


WHAT BUSINESS INSURANCE IS REQUIRED BY LAW?


The specific type of insurance you need for your business by law varies based on the state or country where you are located. In general, you can expect to pay for:

  • Workers’ compensation insurance

  • Unemployment insurance

  • State disability insurance

Depending on what types of services your business offers, you may be mandated to purchase additional types of policies. Check with the Small Business Association chapter in your state for more info.


WHAT KIND OF INSURANCE DO YOU NEED FOR A SMALL BUSINESS?


Most small businesses need to hold General Liability and Property Insurance, alongside worker’s compensation insurance, unemployment insurance, and state disability insurance. You may also need Professional Liability Insurance, which helps cover the costs resulting from any mistakes you might make.


Additional policy needs will depend on the nature of your business and its day-to-day activities.


WHAT IS COVERED UNDER A COMMERCIAL GENERAL LIABILITY POLICY?


A commercial general liability policy protects you if you’re found liable for property damage or personal injury. It covers negligent acts that are non-professional (e.g., your housekeeping staff leaves a client’s bathroom sink running, causing major water damage to the client’s home).


The insurance company will typically cover the legal costs and damages required by the court if they find you liable for the situation.


WHAT IS THE DIFFERENCE BETWEEN PROFESSIONAL AND GENERAL LIABILITY INSURANCE?


Professional liability insurance covers negligence related to your business operations (e.g., poor advice leading to adverse outcomes for the client) that doesn’t result in injuries or physical damages. On the other hand, general liability insurance protects against physical injury or damage to property.


Although both types of policies protect you against business liabilities resulting from lawsuits, they differ in the type of risk they cover.


WHAT IS COVERED UNDER A BUSINESS OWNER’S POLICY?


Business owners’ policies protect purchasers against a variety of liabilities, including natural disasters (fire, tornadoes, earthquakes), theft, and anything arising from day-to-day business operations. You can think of a business owner’s policy as a combination of business property and liability insurance in one comprehensive package.


Business owners’ policies are a combination of multiple insurance policies.


WHAT ARE THE BENEFITS OF WORKERS’ COMPENSATION INSURANCE?


Workers’ compensation covers medical treatment, lost wages, and compensation payments for any permanent disability that results from an employee being injured on the job. It may also cover rehabilitation, death benefits, and legal fees.


Regardless of what the policy covers (the specific requirements are set by individual states), you as the employer are required to cover the premiums.


DO I NEED PRODUCT LIABILITY INSURANCE FOR MY BUSINESS?


Product liability insurance (PLI) isn’t required by law. However, if you sell a defective product that causes bodily injury or property damage, PLI helps you cover the resulting legal costs and liability, which can be substantial in either of the aforementioned cases.


In general, if you sell physical goods, you should have product liability insurance. Note that the further you are down the manufacturing line, the cheaper your premiums — e.g., the store owner pays less than the manufacturer.


DOES AN LLC NEED BUSINESS INSURANCE?


In most states, LLCs are not required by law. Though an LLC provides some protection over a sole proprietorship (since it creates a divide between your personal and business assets), you still want to consider business insurance to protect your business assets.


Without adequate business insurance, the cost of defending yourself legally and paying out damages might bankrupt your company, despite shielding your personal assets.


WHAT IS HOME-BASED BUSINESS INSURANCE?


Home-based business insurance is designed to protect those who work out of their homes against third-party liability claims, property damage claims, and more. It covers things not covered by a homeowner’s policy, including your business technology holdings, files, and equipment.


Such a policy is necessary for those who host client visitations, keep inventory on hand, or provide office space to employees.


HOW MUCH DOES BUSINESS INSURANCE COST?


As general guidance, small businesses should aim to budget between $30 to $80 per month. The primary factors that impact liability insurance costs are the number of employees, business’ location, and your industry’s exposure to risk.


High-risk industries (in insurance terms) are typically determined by chances of damage to employees and civilians, construction being one of them. Other specifics like first-time owners or prior claims, or higher coverage limits may also result in a higher liability premium.


HOW ARE GENERAL LIABILITY PREMIUMS CALCULATED?


Many insurance companies calculate your general liability premiums using the Insurance Services Office’s (ISO) classification and rating system that factors in:


  • The business classification reflecting your industry and type of operation

  • The rate, which reflects the limits you have chosen for your policy’s coverage

  • The exposure base, which factors in things like your sales volume, size of physical location, and more

IS BUSINESS INSURANCE TAX DEDUCTIBLE?


Per the IRS, the costs you incur to conduct business are deductible from your federal income taxes. These costs can include the premiums you pay for business insurance (the specific language says “ordinary and necessary cost of insurance”). Make sure to consult your accountant to be sure.


_____________________________

Original article shared here:

Waterford, Auburn Hills, Berkley, Beverly Hills, Birmingham, Clarkston, Clawson, Farmington Hills, Fenton, Ferndale, Hazel Park, Keego Harbor, Madison Heights, Novi, Oakland, Pontiac, Rochester, Royal Oak, Southfield, Sylvan Lake, Troy, White Lake, Walled Lake, Wixon, Michigan, Small business Insurance, General Liability Insurance


The Huttenlocher Group

1007 W Huron St, Waterford , MI  48328

(248) 681-2100

1007 W Huron St, Waterford Twp, MI 48328

(248) 681-2100

  • Grey Facebook Icon
  • Grey LinkedIn Icon
  • Grey Google Places Icon

We use cookies to personalize and enhance your experience on our site.  Visit our Privacy Policy to learn more. By using our site, you agree to our use of cookies, as well as our Privacy Policy and Terms of use.