There are many factors to consider when picking the best business insurance policy. There are many different types of policies depending on your industry and risk. In order to select the best insurance policy for your small business, there is a lot you should know — including which type of business insurance policies are necessary based on your industry and risks.
When it comes to business insurance, every business is different. The coverage you choose should fit your business’s unique needs. If you own a small business with a storefront, event venue, or restaurant, chances are you need more than just general liability insurance. Here’s a list of factors to consider when choosing the best business insurance policy for your business:
What is the size of your business?
Small businesses generally have lower costs, because they have fewer employees and other risks to cover. But they need more coverage in areas like property damage and liability than large companies do.
What types of risks are in your industry?
The higher your risk factor, the more insurance you’ll need. For example, the insurance needed for a skyscraper window washing business will be completely different from the business insurance needed for a dry cleaning company.
What types of inventory do you have and how much?
The risks involved with your inventory may impact your business insurance needs. Companies that store or transport certain types of hazardous materials may be required to carry additional insurance policies.
How many employees do you have?
A factor to consider when finding your best business insurance policy is how many employees you have. This can influence the amount of insurance you need for workers’ compensation, general liability, and other policies.
What is your risk tolerance?
In other words, how much of the risk are you willing to cover financially in the event of a loss? You may choose to have a higher deductible or additional co-insurance to reduce your premium and require you to cover some of the costs out of pocket in the event of a specific loss.
What are the common types of business insurance policies?
Business Owners’ Policy (BOP)
A business owners’ policy (BOP) combines several types of coverage into one convenient package for small businesses. This type of policy typically includes general liability insurance, property insurance, and business interruption insurance in one plan, which makes it more affordable than purchasing each policy separately.
Business Liability Insurance
This is probably the most important policy you will get for your business. It covers any accidents or mishaps that happen at your premises, which result in injury or damage to other people or their property. This could include customers who slip and fall on your premises or another type of accident.
It is especially important if your business has dangerous equipment or materials, such as heavy machinery or chemicals. If these products cause damage to someone else’s property or injure them, then this policy will cover it.
Professional Liability Insurance
Also known as errors and omissions (E&O) insurance, professional liability insurance protects your business against claims that a professional service you provided caused your client to suffer financial harm due to errors or failures to perform. This type of insurance is particularly important for consultants and service providers who are performing services in their area of expertise. Without such coverage, you could be held personally liable for mistakes or negligence on the job.
Cyber Liability Insurance
This is the most commonly overlooked business insurance policy to consider. For business owners who are worried about getting hacked and facing lawsuits, a cyber liability policy can provide peace of mind. Cyber liability policies cover a variety of risks, including the cost of restoring lost data, credit monitoring for customers whose information has been stolen, legal defense costs, and settlement payouts if your business is sued over a data breach.
Worker’s compensation insurance, also known as worker’s comp, is a type of business insurance that covers medical expenses for workers injured on the job. You usually have to carry worker’s compensation insurance if you are in business for yourself, but not all states require it. If you hire employees, most states require you to get worker’s compensation insurance.
Umbrella liability insurance is a form of liability insurance that will supplement your basic liability policies. An umbrella liability policy covers a much higher limit and goes above and beyond claims directly relating to your business.
Commercial Package Policies
Commercial package policies, or CPPs, are a type of business insurance policy that offers a variety of coverage options in one bundle. Instead of buying separate policies for each individual coverage, CPPs can provide property insurance, general liability, and business interruption all at once.
Inland Marine Insurance
This is a broad term that can include a number of different types of coverage for property used in business operations (such as accounts receivable, inventory), as well as tools and equipment used for construction projects at various locations (such as cranes or bulldozers). Property that is moved from one location to another may be covered under this type of policy. Inland marine insurance also refers to shipments of goods while they are in transit.
Small businesses are an integral part of the U.S. economy, and none of these small businesses would be able to operate without adequate business insurance coverage. When you’re choosing the best business insurance for your small business, look at all of the factors that could affect your company in the future, such as liability and property damage claims. By taking the time to consider all of your company’s needs, you will be able to choose the best business insurance policy—not just from an insurance perspective, but from a business perspective as well.