What Type of Business Insurance do I Need?
Business insurance is necessary to protect your company from losses due to lawsuits, theft, fire, natural disasters and other hazards. It also protects against problems such as poor management or a drop in demand for your products. This article will cover what type of business insurance you should have and how it can help ensure that your company stays protected. So what type of business insurance do you need? Read on below to find out!
How Does Business Insurance Work?
Business insurance is purchased through an insurance company that provides it to individual businesses through a package. The policy is written to fit your risk profile, so you can’t get insurance coverage unless the company qualifies. Many businesses purchase a general liability policy, covering the company for bodily injury and property damage. This can be the only type of business insurance some businesses need. There are pros and cons to each type of business insurance, so it’s essential to understand them before making your decision.
What Type of Business Insurance is Best?
When you buy the policy, it will usually have a premium rate and coverage amount, a deductible and a maximum amount of days worth of coverage. The premium rate is how much you’ll pay each month for this policy. The coverage amount determines the maximum amount of money the insurance will pay lost due to a covered risk. The deductible is the amount you must pay towards damages before the insurance company pays any remaining balance.
You can determine whether you need to increase your insurance coverage by looking at your prior year’s financial records or conducting a comprehensive business loss analysis.
Types of Business Insurance
- General Liability: This covers any liability at your company due to faulty products, personal injury, etc. It excludes a few things – for example, it doesn’t protect the company when it’s the result of a natural disaster. If you have customers that come to your business to be served, you need to consider workers compensation insurance.
- Workers Compensation: This provides medical and associated costs for accidents or injuries employees receive while on the job. It is required in many states and highly recommended in others.
- Business Auto Insurance: This ensures cars, trucks and vans for liability. It also protects against theft and damage to your company, as well as any personal property in the vehicle.
- Peril: This covers loss or destruction of property that could have happened because of a natural disaster like fire or hail. In other words, it doesn’t cover theft or damage from an act of God.
- Bodily Injury/Property Damage: This insures property loss or damage that could have happened because of a terrible accident, like a fire. It also ensures bodily injury due to a person in your company.
- Professional Liability: This is what protects you from the mistakes and poor management that could cause harm to your employees, customers and business. It also covers the losses you receive from medical malpractice and lawsuits from injured people.
When negotiating a policy, remember that you can opt-out of any of the above protections to reduce the premium; however, it’s essential to consider the risk and benefit of any such decision.
When considering which insurance you need, it is crucial to consider which risks you want to protect against. For example, if you are worried about bodily injury, property damage and professional liability, then you may need a combination of all of them.
Which Type of Business Insurance do I Need?
The first step in determining if you need business insurance is looking at your risk exposure. This includes your products, service, client base and location. If your business is newer and has minimal assets, you may not need much insurance. However, if it’s older and has many assets that are expensive to replace, then you may want to buy more coverage.
If there is a higher risk in your industry due to the service you provide or by the nature of your products (like having a dangerous ingredient), you will probably want to purchase more insurance. This could include professional liability insurance as well as general liability.
If you sell products, you may also want to protect yourself against a sudden drop in demand. If this occurs and you need to fire people because of the lack of revenue, business insurance will cover replacement costs.
If your business is a sole proprietorship, you will also need to protect yourself from liability if your assets are used against you. Business insurance will cover this by ensuring that the business assets can’t be seized if your assets aren’t enough to pay a judgment.
Which Type of Business Insurance do I Need? To Conclude
Finally, if you have employees, you need to consider workers compensation and auto coverage. However, this is optional for sole proprietorships.
Find out more about the importance of insurance here.
Other useful links about Business Insurance:
Is Professional Indemnity Insurance a Legal Requirement?
How Much Product Liability Insurance Do I Need?
Is Employers’ Liability Insurance a Legal Requirement?
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