Business Insurance 101: What You Need to Know
So you started your own business. You saw a gap in the market or came up with a brilliant new idea. You’ve started things and maybe even started making a little money. Well, before you take a step forward, it’s time to think about insurance for your business. After all, you’ve taken a big risk by starting your own company, and that means you need to mitigate those risks as best you can.
The hard fact about coverage and business is that you need it. Everything you have for your business, from vehicles to general liability, requires insurance. Without it, you could jeopardize everything you’ve built, face crippling financial problems, or even run afoul of the law. But don’t worry, here are some basics about your business coverage that can help you get the protection you need to succeed.
Types of business insurance
The first thing you need to understand about coverage and your business is the different types that exist. Depending on your business, you may need specific types of insurance. In general, business coverage can be divided into three broad categories: insurance for owners or partners and key employees, business profits and property coverage, and liability insurance. Here’s a breakdown of each different type.
Insurance for business owners, partners and key employees
If you own a business, you need specific types of coverage depending on how your business is set up. These may include, but are not limited to:
• Life Insurance – This coverage protects your family if something happens to you. If you are the sole owner of your business, this insurance is key because business owners are personally liable for all business debts.
• Disability Insurance – In the event that you are injured or become ill, disability insurance will provide you with income for a specified period of time.
• Partnership insurance or buy-sell cover – If you have a partner in your business, this insurance will help you buy your partner’s shares and continue to run the business in the event of their death.
• Critical Illness Insurance – If you become critically ill, this cover will give you a lump sum to help you get through the situation.
• Key Person Insurance – This cover protects you in the event of the death or loss of those employees who are most important to your business.
Business and Property Profits Insurance
In addition to coverage that protects individuals, your business may also require the following types of insurance to protect its assets and revenue. Keep in mind that companies that deplete your home may require coverage outside of your home insurance. It’s always a good idea to contact your coverage company to discuss running a business out of your home.
• Property Insurance – This coverage covers any buildings or properties owned by your business if they suffer damage or destruction from fire, earthquakes, avalanches and other similar disasters.
• Contents insurance – if you have a property or building that stores things for your business, such as a warehouse or storefront, this policy covers the loss of those contents. Note that even if you rent a space, you may still need contents insurance, as your lease will likely make you responsible for what you put in the rented space. Home business owners will need to contact their insurance companies to discuss what should be included in their home policy.
• Business Interruption Insurance – When disaster strikes, this policy will cover you for the time your business cannot operate at its proper efficiency.
• Vehicle Insurance – If your company owns vehicles, you are required by law to have coverage. If you use your personal vehicle for your business, make sure that you contact your insurance company.
Civil liability insurance
Liability covers you in the event of an error or accident for which you can be held responsible. There are three types to consider when owning a business: personal liability, product liability, and professional liability. They cover you against personal liability, something wrong with your products and, accordingly, lawsuits brought by your customers.
Starting your own business is a big risk, but that doesn’t mean you have to take unnecessary risks. If you own a business, you need the right coverage. Be sure to shop around and find the insurance package that’s right for your business. If you have any further questions, we can help you understand your policies to ensure you have the right types of coverage from the right types of insurance companies.