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Business Insurance Types: Understanding What You Need

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Is engineers’ insurance the same as architect’s insurance? Is a landscaper’s insurance the same thing? The answer is no—and yes. Every small business owner needs certain business insurance policies to protect them in case the worst happens. But every business is going to have different needs, risks, and exposure. 

Every business owner—from medical professionals, accountants, architects, to landscaping services— should examine their risks and put together a business insurance plan based on that information. Be sure to shop around and find the right insurance company for your small business.

Why Businesses Need Insurance

Running a business comes with inherent risks and uncertainties. Regardless of the industry or size of the business, unforeseen events can occur that have the potential to disrupt operations, cause financial losses, or even lead to legal liabilities. This is where insurance plays a crucial role. Here are some key reasons why businesses need insurance:

  • Protection against property damage and loss: Business insurance provides coverage for property damage caused by incidents such as fire, theft, vandalism, or natural disasters. Whether it's your office space, equipment, inventory, or any other physical assets, insurance can help cover the costs of repair, replacement, or rebuilding, ensuring that your business can recover swiftly without bearing the entire financial burden.
  • Liability coverage: Businesses face various liabilities, including third-party injuries, property damage, or legal claims arising from their products, services, or operations. Liability insurance protects the business from the financial repercussions of such claims, covering legal expenses, settlements, or judgments. Without liability coverage, a single lawsuit could potentially bankrupt a business.
  • Business interruption coverage: Unexpected events, such as natural disasters, accidents, or infrastructure failures, can disrupt business operations, leading to significant revenue losses. Business interruption insurance helps compensate for the income lost during these disruptions, covering ongoing expenses like payroll, rent, or loan payments. It provides a safety net that allows businesses to navigate through difficult times and resume operations as quickly as possible.
  • Employee protection: If your business has employees, it's important to provide them with a safe working environment. Workers' compensation insurance is typically required by law and covers medical expenses and lost wages for employees who are injured or become ill while on the job. Having this coverage not only protects your employees but also shields your business from potential lawsuits related to workplace injuries.
  • Risk management and peace of mind: Insurance plays a crucial role in risk management by helping businesses identify potential risks and develop strategies to mitigate them. By transferring some of the risks to an insurance provider, businesses gain peace of mind, knowing that they have financial protection in place. This allows business owners to focus on their core operations and pursue growth opportunities without constantly worrying about unforeseen events.

Insurance is a fundamental tool for businesses to safeguard their assets, protect against liabilities, and manage risks. It provides financial security and peace of mind, enabling businesses to navigate uncertainties, recover from setbacks, and continue thriving in a competitive landscape. 

Most Common Business Insurance Types

There are nine basic types of business insurance every small business needs, or should consider looking into, to protect their business. 

  1. General Liability Insurance: Every business needs general liability insurance. This type of insurance will cover third-party bodily injury, third-party property damage, and advertising injury (accusations of libel, slander, copyright infringement, etc.). The type of your business, the size, the assets, and corporate structure will determine the amount of coverage you need. Every insurance company will offer different rates and coverage options, so be sure to do your research (or speak with an agent who can help).
  2. Commercial Property Insurance: A business should carry commercial property insurance to insure against losses of business or personal property. This type of business insurance policy usually covers damage to the structure and inventory or property within it from damage from storms, fire, theft, or vandalism.
  3. Business Interruption Insurance: If your property is damaged and needs to be repaired, it can often be disruptive to your business. If you can’t remain open during repairs, business interruption insurance can help cover financial losses. It can cover your employee payroll, taxes, operating expenses, debt repayment, and sometimes the cost of a temporary location.
  4. Professional Liability Insurance: If you run a business where you offer any kind of professional advice or are responsible for completing projects—such as a doctor, lawyer, or architect—you need to carry professional liability insurance, also known as errors and omissions insurance. This policy can protect you and your business if you’re accused of negligence (or were negligent), missed deadlines, undelivered services, or breach of nondisclosure/copyright insurance. Doctors and other professionals are often required to carry a specialized type of professional liability called malpractice insurance.
  5. Workers’ Compensation Insurance: If you hire employees to work in your business, you’re legally required in most states to obtain workers’ compensation insurance. Workers’ comp protects you and your employees if they’re injured or become ill at work. This insurance can cover an employees' medical expenses and lost wages while they’re recuperating. If an employee agrees to accept workers’ compensation as part of their hiring package, they also usually waive the right to sue you for an incident.
  6. Commercial Umbrella Insurance: Sometimes, it can be more affordable for a small business to purchase an umbrella policy instead of upping the limits of an underlying policy with their insurance company. An umbrella policy may also cover business risks that an underlying policy excludes. For example, if the policy limits of your general liability policy are exhausted, the umbrella insurance can step in to cover whatever is remaining.
  7. Commercial Auto Insurance: Are vehicles part of your business model? Do you make deliveries or conduct house calls? If you use a car, truck, etc. for business purposes, then you need commercial auto insurance. Did you know if you get in an accident while doing business-related work, your personal car insurance may not cover it? You could lose thousands of dollars to repair your damaged vehicles and be held personally responsible for any injuries or property damage to another person. 
  8. Cyber Liability Insurance: If your business is the subject of a data breach and customer information that was accessed or stolen, cyber liability insurance can notify impacted individuals, provide them with credit monitoring, and cover the costs of informing the public if necessary. Some insurers call this data breach insurance. Anyone who stores customer information electronically needs to obtain this type of insurance.
  9. Product Liability Insurance: If you manufacture or sell any type of product, you can be held liable if that product injures someone, damages their property, or makes them sick. Product liability insurance can help cover the associated medical costs, replacement of the purchased product, and even legal fees and settlement costs if your business is sued. 

What Types of Business Insurance is Required?

While the specific insurance requirements for businesses can vary depending on factors such as industry, location, and size, there are several types of insurance that are commonly considered essential. Here are some of the key types of business insurance that are often required or strongly recommended:

  1. General Liability Insurance: General liability insurance is a foundational coverage that is typically required for businesses. It protects against third-party claims of bodily injury, property damage, or personal injury caused by your business operations, products, or services. General liability insurance covers legal expenses, settlements, and judgments, providing financial protection against potential lawsuits.
  2. Workers’ Compensation Insurance: Workers' compensation insurance is a legal requirement in most jurisdictions for businesses that have employees. It provides coverage for medical expenses, rehabilitation costs, and lost wages for employees who suffer work-related injuries or illnesses. Workers' compensation insurance not only protects employees but also helps businesses avoid costly legal disputes related to workplace injuries.
  3. Commercial Property Insurance: Commercial property insurance is essential for businesses that own or lease physical assets such as buildings, equipment, inventory, or furniture. It provides coverage for property damage or loss caused by incidents like fire, theft, vandalism, or natural disasters. Commercial property insurance ensures that businesses can recover financially by covering the costs of repair, replacement, or rebuilding.
  4. Professional Liability Insurance: Professional liability insurance, also known as errors and omissions (E&O) insurance, is crucial for businesses that provide professional services or offer advice to clients. It protects against claims of negligence, errors, or omissions that result in financial losses for clients. Professional liability insurance covers legal fees, settlements, or judgments, and is highly recommended for professions such as consultants, lawyers, accountants, and healthcare professionals.
  5. Commercial Auto Insurance: If your business owns or uses vehicles for operations, commercial auto insurance is typically required. It provides coverage for vehicles used for business purposes, including accidents, property damage, or injuries caused by the business-owned vehicles. Commercial auto insurance protects businesses from the financial consequences of accidents and helps cover the costs of repairs, medical expenses, or legal claims.

It's important to note that the specific insurance requirements for businesses can vary significantly depending on industry-specific regulations, contractual obligations, or the nature of the business. Consulting with an insurance professional or broker can help determine the precise types and levels of coverage needed to comply with legal requirements and adequately protect your business.

Let us help you protect your business with business insurance and keep your mind at ease. At Tivly, our goal is to help you find protection for your business as efficiently as possible by matching you with the right insurance provider. Simply give us a call at 877-907-5267 or complete the form above and one of our specialists will contact you right away.


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