Buying Guide
Before we go into the details of buying insurance, let’s clarify, ‘What is business insurance?’
Business is your professional venture used to derive monetary and financial benefits through commercial activity. Your business is not risk-free. Regardless of your business’s size, it is prone to many risks – the intensity of the attached risks can be high, medium, and low.
One risk that almost all businesses face is the risk of fraud. As a business owner, you can never guarantee 100% that the creditors and debtors you come in contact with will not deceive you. While you cannot run your business with paranoia, you can act proactively and secure yourself against such circumstances.
In addition to fraud risks, there are so many other risks that a business might face. If you still ask, “What is the purpose of insurance for business?” Let’s look at the following examples of turbulent events.
A shipment of important inventory that you wait for met an accident. Or, you had a fire at your warehouse, and all production work was canceled. Or, there are riots in the city, and your office suffered an attack.
Business insurance comes in handy in all of the above scenarios. Business insurance protects your assets and ensures that you don’t suffer heavy losses. The following are some of the threats against which you can get insurance:
- Loss of income
- Lawsuits
- Employee injuries and illnesses
- Theft
- Property damage
- Vandalism
Let’s look at what each risk means:
Loss of Income
In the world of business, the only thing that is constant is uncertainty. Many businesses are forced to shut down after not managing to deal with unforeseen circumstances. To protect themselves against the devastating effects of natural disasters or other perils, business owners can get business interruption insurance.
Under the business interruption insurance coverage, you can recover the amount of the lost income in the event that your business is forced to shut down during a covered period.
This insurance covers any natural disaster that makes it impossible for a company to stay open or other damage like a fire in the warehouse or the factory.
Let’s assume that your shop got destroyed by a tornado. If this was a covered peril, you would be paid for the income you might have received had your business not been affected by the tornado.
Even though the extent of coverage differs, most insurance companies cover the following operating expenses:
- Revenue
- Mortgage, rent, and lease payments
- Payroll
- Relocation costs
- Loan payments
- Taxes
The following is the list of expenses that this type of insurance doesn’t cover:
- Broken items
- Undocumented income
- Flood or earthquake damage
- Utilities
Property Damage
Property insurance provides protection for your business assets. This insurance will financially cover you when you experience any asset damage.
Employees Injuries and Illnesses
A company can get severely affected in cases when an employee gets injured or seriously sick at the workplace. With this insurance coverage, you can pay for the medical expenses of your employees.
Theft
If your business suffers any losses due to theft, you could get it recovered through insurance. This is extremely advantageous for businesses operating in areas with a high crime rate.
Vandalism
Riots or other civil disturbances may lead to vandalism of both private and public properties. If your business gets affected, the insurance will take care of it.
Lawsuits
Facing a lawsuit can be quite expensive for a large number of businesses. You wouldn’t want to spend your profits on lawsuits. With business insurance, you can get your legal expenses covered.
What Insurance Does a Business Need?
Your business has its own set of assets and liabilities. The basics of a business owner’s policy include property insurance and liability insurance. In case you have a fleet of business vehicles, you will also require insurance for your automobiles.
Here is a brief list of the different types of business insurance policies:
Commercial Property Insurance
This type of insurance policy helps you protect your business property and physical location. This includes protection for:
- Inventory
- Tools
- Furniture
- Equipment
So, in case of a fire, for example, this insurance will help you replace the damaged equipment.
Workers’ Compensation Insurance
Work-related injuries are quite common at workplaces. In that case, it is the responsibility of the employer to provide medical coverage. This particular insurance policy helps businesses provide medical benefits to their employees. The insurance covers the following:
- Funeral expenses
- Medical care
- Disability benefits
- Lost wages if your employees need medical leave for recovery
General Liability Insurance
Maybe you wonder, “What type of insurance does my business need?”. All companies are strongly advised to get general liability insurance. It can help pay for bodily injury and property damage claims. It also covers claims of slander and libel.
For example, in case a customer gets injured in your shop while shopping, the insurance can help you pay for the damage.
Business Income Insurance
Your business operations can be affected by many circumstances. If you suffer a loss of income from wind damage, fire, theft, and other covered losses, the insurance can help cover your lost revenue.
For instance, in case you have to temporarily shut down your business after a covered loss, the insurance can pay you for the lost revenue.
Commercial Auto Insurance
Just like you would want your property to be safe and secure, you want your moveable assets to be saved from any kind of financial loss. Under this insurance, you will be able to recover any losses that your business automobiles suffered due to a covered peril.
Product Liability Insurance
What will happen if the product that you sold proves to be harmful to the end-user? A lawsuit. This is very common in the corporate world. For your business, you might need product liability insurance.
For example, many years ago, a woman sued a fast-food chain after she drank a hot beverage that the store offered and burnt her tongue. The food giant had to pay damages. It now also adds a caution warning on its cups to avoid such cases.
Home-Based Businesses
Just because you’re running your business from home doesn’t mean it’s risk-free. You will want your business equipment, including computers, printers, copiers, and other office furniture secured. Commercial insurance will help you protect your financial assets.
Factors to Consider For Business Insurance
The next question to consider is, “how to get business insurance?” In this section, we will talk about some factors to evaluate before you get insurance for your business.
Your Risk Levels
All companies have to deal with some form of business risk – the intensity and severity of this risk may differ from business to business. When you’re planning to get commercial insurance, you will have to access your risk levels.
Professional Guidance
Analyzing business risk levels and other factors can be quite tricky. Before you get insurance, you should seek professional guidance for the definition of potential business risk your business might be facing. They will give you a better understanding of the coverage you need and the premium you should opt for.
Employment Insurance
Under the employment insurance law, workers who lost a job can get temporary financial assistance. Before you apply for this coverage, you need to get yourself acquainted with the regulations for employment insurance laws in your state.
Insurance Provider Accessibility
The main thing you have to look at when buying insurance is the accessibility of the company. Check how easy it is to get insurance or file a claim with the company. You don’t want to run from pillar to post for your claim and would be more inclined towards an insurance provider that is more accessible.
Geographical Region Coverage
You should know what geographical areas your insurance covers. If you have a multinational business that expands worldwide or to different parts of a country, you will have to get insurance that covers a greater area.
How Much Does Commercial Insurance Cost?
There are a lot of factors that influence the cost of commercial insurance. There is no standard business insurance cost.
Some of the factors that affect your cost includes:
- The type of your business and the industry-specific risks it comes with
- The number of years you’ve been in business
- Gross annual revenue
- Your business location
- Ownership of commercial vehicles or property
- The number of employees
Conclusion
Business insurance is an important safety measure regardless of your industry sector or size of your company. In our article, we named the best business insurance companies on the market. Choose the ones that fit your needs and ask for a quote to move a step ahead in securing your business assets.
