If you are ready to launch a new small business, you may be wondering what types of insurance coverage you need. Just as you insure your home and your car, there are certain policies you need in order to protect your business from risks associated with unexpected events, liabilities and other losses.
Here is a rundown of the basic types of business insurance coverage. The amount of coverage you get will depend on your particular industry and your individual company.
Property Coverage
What would you do if a fire, severe weather or other unplanned event destroyed your tools and your equipment? Property coverage in a business insurance policy protects the physical property of your business against certain causes that are specified in your policy.
This policy may cover the actual building in which your business is located, as well as your inventory, furnishings, equipment and other property. This policy may also cover other costs associated with equipment breakdowns or the cost of removing debris.
Liability Coverage
This type of insurance protects your business in a variety of legal situations. There are three basic types of business liability coverage:
- General liability coverage: This type of insurance provides protection against lawsuits associated with accidents, injuries and claims of negligence. For example, if someone is injured on your business premises and files a lawsuit against you, this type of coverage may help cover some of the related costs. This insurance also protects your business against false advertising claims and claims of negligence.
- Product liability coverage: If your company makes, sells or distributes a product, this coverage can protect you in the event your product is defective and causes injury or damage.
- Professional liability coverage: This type of coverage protects against errors and negligence. Some states require certain professions, such as physicians, to carry such a professional liability policy.
Insurance for Employers
If your small business has employees, you are required by state law to pay for certain types of insurance:
- Workers Compensation: This coverage provides protection to employees who are injured on the job. It reimburses the employee for medical costs, rehabilitation costs and lost wages that result from the injury. Each state, except Texas, requires businesses to carry workers compensation, and each state has its own requirement for coverage.
- Unemployment Insurance Tax: If you have employees, you need to register your business with your state’s workforce agency. Then you are required to pay unemployment insurance taxes as determined by your state. Visit the State Taxes page on IRS.gov for more information.
- Disability Insurance: If your business is in California, Hawaii, New Jersey, New York, Puerto Rico or Rhode Island, you are required to purchase disability insurance for your employees. It may be provided as part of an employee benefit package through your insurance company.
Coverage for Business Vehicles
Does your company conduct business with its vehicles? If so, you will need business auto coverage for protection against liability from accidents. If you have many vehicles and drivers, your business may qualify for a fleet insurance policy.
Data Breach Coverage
Data breach (also called data compromise coverage) protects your company against any associated legal or other costs in the event employee or customer data is stolen or is accidentally released by your company.
Home-based Business Insurance
Do you run your small business from home? Your homeowner’s policy may not cover your business supplies or equipment. A Home-based Business Insurance policy may be needed to adequately cover your investment.
Key Person Insurance
If your business is dependent on the skills and knowledge of one or two key individuals, you should consider key person insurance to protect your company. This coverage is a specific life insurance policy that makes your business the beneficiary in the event that person dies unexpectedly.
Every business is different and may have its own unique insurance needs. Talk with your insurance agent about what coverage is right for your business. Then compare policies and prices before making a decision that is best for your small business. You’ll rest easier knowing you are covered.
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