Understanding business insurance, knowing whether you need it, and choosing the right coverage for your business can be tricky. The legal coverage you get from setting up a business entity such as a limited liability company (LLC) or corporation is a great start, but typically only protects your personal property in the event of a lawsuit. Purchasing business insurance can be a great add-on to fully protect your personal and business assets.
What Kind of Insurance Do I Need?
The type of insurance you need for your business depends on several factors. Some business insurance policies are required by law — for example, the federal government requires all businesses with employees to have workers’ comp, unemployment, and disability insurance. After you get the required insurance, you can buy other forms of business insurance to cover other business risks that you wouldn’t be able to cover if something were to happen.
Here is a breakdown of some common types of business insurance:
- General liability insurance — This insurance is good for any type of business and protects against financial loss due to property damage, defending lawsuits, bodily injury, medical expenses, and libel or slander.
- Business property insurance — This type of coverage helps protect your property from things like fire or natural disasters and covers expenses related to necessary repairs, replacement costs, etc. Business property insurance does have limits, though — you can choose your limits based on estimated repair costs but if you exceed that limit, you will have to pay out of pocket for the rest.
- Product liability insurance — This is good for businesses that manufacture, wholesale, and distribute products. It covers financial loss in the event of damages due to a defective product.
- Professional liability insurance — If your business offers services to customers, this may be good coverage to have. It protects against financial loss in the event of malpractice or errors.
- Business owner’s policy — This is a great option for small business owners who want to bundle all the essential coverages into one package. It can make buying business insurance simpler less expensive.
Tips for Buying Business Insurance
It’s important to do your research on different policies, insurance companies, and the types of insurance that would be best for your business before you decide to buy. Prices, benefits, and terms can be vastly different from agency to agency. First and foremost, find a reputable licensed commercial agent that can give you all the information you need and always has your best interest in mind.
Secondly, take a while to assess the assets, property, or accidents that could be a risk for your business and financial health. If you conduct business in an area that experiences regular natural disasters such as hail, fire, tornadoes, hurricanes, etc., you’ll want to protect against that potential loss should it occur and damage your property or equipment. Also assess any other liabilities you could face should you experience a lawsuit or personal injury to your employees.
You should also be re-evaluating your insurance coverage annually. Your business will grow and change, and that might mean that you need different coverage in different areas. Discuss this with your licensed insurance agent to determine how changes in your business will impact your coverage.
Need help with your small business finances? Reach out to us at Republic Bank by calling 800-526-9127 and visit our resource library for more financial planning tips.