No two businesses are the same. Your choice of business structure, location, and anticipated growth will all impact which type of coverage is right for you. The following section provides an overview of the most common types of small business insurance coverages. Not all coverages or types of coverage are available in every state, so be sure to work with an insurance professional who can help you understand the regulations specific to your area before you begin the purchasing process.
LIABILITY INSURANCE
Liability insurance is one of the most important types of small business insurance coverages you can purchase. This type of coverage helps pay for costs associated with liability claims and lawsuits if your business does not adhere to certain procedures around safety and sanitation or causes injury or damage to a person or property while conducting its operations.
COMMERCIAL PROPERTY AND CASUALTY COVERAGE
This type of coverage protects your business from unforeseen losses that can occur due to fire, theft, or other damage to your property. It often includes some form of liability protection as well. Small businesses generally have two options when purchasing this type of insurance: on an all-risk, replacement cost basis or a named perils basis. An all-risk policy covers all potential hazards and provides replacement cost coverage, while a named-perils policy covers only specific types of loss.
WORKERS' COMPENSATION COVERAGE
In several states, employers are legally required to carry workers' compensation coverage for their employees. However, in some cases, small businesses may be exempt from this regulation if they have a small number of employees and work in certain industries (agriculture is the most common example). Workers' compensation provides medical coverage and lost wages for work-related injuries or the death of an employee.
BUSINESS AUTO COVERAGE
If your business owns, leases, or regularly uses vehicles for its operations; you should consider purchasing business auto coverage. This type of coverage pays for losses that your business suffers as a result of accidents involving company-owned cars and trucks. It can also help protect you from liability claims resulting from damage or injury caused by an employee acting within the scope of their employment.
UMBRELLA POLICY PROTECTION
An umbrella policy is a stand-alone policy that provides an extra layer of protection over and above your other policies. It can provide coverage for liability, commercial auto, or property damage claims, depending on which type of coverages you have in place. Umbrella policies are flexible, so you can purchase as much or as little coverage as you need to suit your individual business needs. It is essential to note that umbrella policies do not provide any mandatory coverages required by state law, such as workers' compensation or liability coverage.
CYBER LIABILITY INSURANCE
Cyber liability insurance is a relatively new addition to the small business insurance market. However, as the use of electronic equipment and data networks has grown, so too have the number of cyber risks. Cyber liability insurance protects businesses against losses caused by a breach of data or theft of information that could possibly lead to identity theft or other financial damages. This type of coverage typically includes costs associated with hiring an external worker to aid in recovery, legal expenses, costs associated with data recovery efforts, notification costs to affected individuals, and many others.
As we can see, there is a wide variety of types and coverages available to small businesses. It will be left up to you to determine which type of insurance is right for your business, what limits should be placed on each coverage, and whether or not additional types of coverage may be necessary. Be sure that any insurance professional that you work with is properly licensed in your state, has experience with small business insurance coverages, and is willing to take the time to understand your individual needs.
