Most small businesses need to purchase at least the following four types of insurance:
Property InsuranceProperty insurance compensates a business if the property used in the business is lost or damaged as the result of various types of common perils, including fire, theft, and others. Property insurance covers not just a building or structure, but also what insurers call personal property:
- Office furnishings
- Raw materials
- Other items vital to business operations
Depending on the policy type, property insurance may include coverage for equipment breakdown, debris removal after a fire or other event, some types of water damage, and other losses. It may also provide operating funds while the business recovers from a catastrophic loss.
Any enterprise can be sued. Customers may claim the business caused harm as the result of, for example, a defective product, an error in service, or disregard for another’s property. Or a claimant may allege the business created a hazardous environment. Liability insurance pays damages for which the business is found liable, up to policy limits, as well as attorneys’ fees and other legal expenses. It also pays the medical bills of anyone injured by, or on the premises of, the business.
Business Auto Insurance
A business auto policy provides coverage for business-owned vehicles. These policies compensate third parties for bodily injury and/or property damage for which the business is legally liable, up to policy limits.
Workers Compensation Insurance
In every state but Texas, an employer must carry worker’s compensation insurance when employing a certain number of people. This number varies state by state, but is generally between three and five. Worker’s comp insurance, pays for medical care and replaces a portion of lost wages for employees who are injured in the course of employment, regardless of fault. When a worker dies from on-the-job injuries, this coverage provides compensation to the employee’s family. An extremely small business, such as one operated by one or two people out of a home, may not need worker’s compensation insurance. But such a business often needs more property and liability insurance than is provided in a typical homeowner’s policy.
Other Types of Business Coverages
Errors and Omissions Insurance/Professional Liability
Some businesses involve services such as giving advice, making recommendations, designing things, providing physical care, or representing the needs of others. Such services can lead to client lawsuits alleging that a business’s failure to properly perform a job injured them. Errors and omissions or professional liability insurance covers those situations. The policy will pay any judgment for which the insured is legally liable, up to policy limits. It also provides legal defense costs, even in cases of no wrongdoing.
Employment Practices Liability Insurance
Employment practices liability insurance covers (up to policy limits) damages for which an employer is judged in legal violation of an employee’s civil or other legal rights. In addition to paying a judgment for which the insured is liable, this kind of insurance also provides legal defense coverage. Such costs can be substantial even in cases of no wrongdoing.
Directors and Officers Liability Insurance
Directors and Officers Liability insurance protects corporate directors and officers of both for-profit or non-profit organizations. These policies provide coverage if a lawsuit claims that an organization’s directors and/or officers acted without proper regard for the rights of others. The policy will pay any judgment for which the insured is legally liable, up to policy limits. It also provides for legal defense costs, even in cases of no wrongdoing.
Key Employee Insurance
These policies can provide compensation to a business for the adverse financial impact resulting from the loss of a “Key Employee” through death or disability.
An umbrella liability policy provides coverage over and above a business’s other liability coverage. Umbrella coverage is designed to protect against unusually high losses. It provides protection when the policy limits of an underlying policy have been exhausted. For a typical business, an umbrella policy would provide protection beyond general liability and auto liability policies. However, an umbrella policy can also provide protection beyond the policy limits of Employment Practices Liability Insurance, Directors and Officers Liability, and other types of liability coverages.
If you would like information about other types of business insurance, please call our agency at 1-936-825-6789 (toll-free at 1-800-666-7049). We'd be delighted to answer any questions you may have about protecting your business with comprehensive insurance coverage.