15 Types of Insurance Small Businesses Should Consider

Fran
Lucy Lazarony
September 8, 2020

Owning a small business is an exciting endeavor. Being your own boss can be so thrilling. But being the boss comes with a lot of responsibility and you will need to protect your business and all you are building with insurance. There’s more to it than you may realize. We’ve gathered up all the different types of business insurance that are essential for a small business owner to have. Here they are and good luck with your business!

1. General Liability Insurance. This form of insurance protects you if you cause any damage whether it be bodily damage or damage to the client’s or another’s property. Most employers require general liability business insurance. For example, a contractor working in the construction industry would be required to have general liability business insurance for contractors.

2. Personal Liability Insurance. Personal liability insurance protects professionals such as lawyers, doctors, accountants and real estate professionals against negligence and other claims from clients. Any professional who has expertise in a specific area warrants this kind of insurance because general liability insurance doesn’t offer protection against claims of negligence, misrepresentation and malpractice brought forth by clients. Professional liability insurance is called medical malpractice in the medical field and errors and omissions insurance for real estate agents.

3. Business Owner’s Policy. A business owner’s policy (BOP) extends general liability coverage to protect things such as commercial buildings and personal property. A BOP policy helps cover your business from claims such as fire and theft. BOP also covers claims that rise from the operation of your business, including claims of property damage or bodily injury.

4. Workers’ Compensation. If you have employees, workers’ compensation is a must and required by law in most states. Workers’ compensation offers insurance coverage for when employees become ill or injured on the job. Workers’ compensation covers employees’ medical costs and a portion of their lost wages.

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5. Commercial Auto. For small business owners such as contractors, commercial auto coverage is generally needed if they use their vehicle to transport work supplies such as parts, testing equipment and other tools. Cargo vans and pickup trucks can all be covered with a commercial auto policy. Commercial auto policies protect the business if one of their employees causes injury or damage to someone else while using the business vehicle. Commercial auto policies also protect business vehicles from damage or theft.

6. Business Property Insurance. A business property insurance policy protects your building and all its contents including exterior fixtures and outdoor signs and fences from fire, explosions, storms, theft, burst pipes and vandalism. A business property insurance can be part of a BOP policy.

7. Cyber Security Insurance. A cyber security insurance policy protects your business from computer-related crimes and losses, including data breaches, phishing schemes and ransomware attacks. A cyber insurance policy covers both privacy and data exposures.

8. Directors and Officers Liability Insurance. This liability insurance is, as its name suggests, paid to the directors and officers of a company or to the company itself. Its coverage extends to defense costs from investigations and trials brought against directors or officers of the company.

9. Business Interruption Insurance. Also known as business income insurance, business interruption insurance covers the loss of business income following a disaster. The disaster may cause the closing of the business and result in a rebuilding process. The most common causes of a business interruption are fire and flood.

10. Product Liability Insurance. Product liability insurance protects your business against a lawsuit should a customer claim a product you sold or manufactured led to an injury or to property damage. So if your company creates a product you will need this type of protection.

11. Life Insurance. Should something happen to you, who would provide for your family? Life insurance could pay for your family’s expenses in the days, months and years after your death. With life insurance you select a designated beneficiary, usually a family member, and pay a premium. The policy is paid following the insured person’s death. What most people don’t know is that a life insurance benefit can also help keep your business running, long after you’re gone.

12. Commercial Umbrella Insurance. Need a little extra coverage? A commercial umbrella policy gives you extra liability coverage to help pay for costs that exceed general liability and other liability policy limits. Without commercial umbrella insurance you would have to pay legal bills, medical expenses and damage expenses out of your own pocket once you passed your liability limits. Commercial umbrella insurance gives you more coverage and would cover all of these instances of expenses. Insurance companies write commercial umbrella policies with aggregate limits and these limits can range from $1 million to $2 million. Businesses that interact with clients and customers may have a higher liability risk as do businesses where employees work with heavy or dangerous equipment. So consider risks carefully when choosing a commercial umbrella insurance policy for your small business.

13. Inland Marine Insurance. Inland Marine Insurance is a type of business insurance that helps to cover products, materials and equipment as they are being transported on land by truck or by train. You may want to consider inland marine insurance if you own a business that ships or transports equipment, product and goods on land on a regular basis.

14. Surety Bonds and Fidelity Bonds. Surety and fidelity bonds are forms of insurance issued by licensed insurance companies. These bonds are used to manage risk and protect against losses and damages in commercial business transactions. With surety bonds, a surety, the insurance company, promises to pay one party a certain amount of money should a separate party fail to complete an obligation. Surety bonds help principals, typically small contractors, compete for contracts by reassuring customers that they will complete services or products as promised. Fidelity bonds cover losses caused by dishonest employees, mainly negligence and fraud. Insurance companies, banks and brokerages all use fidelity bonds to protect their businesses from fraudulent employees. Fraudulent trading, theft and forgery are all covered by fidelity bonds.

15. Home-Based Business Insurance. This is business insurance for small businesses that are run out of the business owner’s personal home. Home-based business insurance gets added to a homeowners insurance policy as a rider. It offers protection for a small amount of business equipment and liability coverage for injuries to third parties. If you are a small business and you are working out of your home, consider protecting your business with home-based business insurance.

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