What Is The Best Type Of Business Insurance For A New Venture?
Starting and running a business exposes the entrepreneur to certain risks – risks that could be covered and avoided with the right type of business insurance. Insurance can provide protection against threats, problems, and costs in the event of certain business crises, including workplace injuries and accidents, natural disasters, and customer injury.
Types of Business Insurance
It’s crucial to choose the right insurance coverage as part of your business plan to protect your company from the high cost of claims and legal disputes. Check out the following types of business insurance to determine the best ones for your business:
General Liability Insurance
Every business needs to have general liability insurance to avoid putting both personal matters and the business at risk. General liability insurance protects your business against legal liabilities and related costs involving untoward accidents, bodily injury, and property damage.
Whether your new business venture is a brick-and-mortar business or a home-based business, carrying liability insurance is highly recommended. Having this basic insurance coverage increases your trust rating because customers are likely to deal with insured businesses.
This insurance policy also covers lost or stolen tools and equipment, as well as defective products sold to you by suppliers or manufacturers. Landlords or property managers also require businesses to be insured to be able to rent out office or shop space.
Public Liability Insurance
Public liability is a type of business insurance that provides coverage for attorney’s fees and medical expenses that may become necessary due to property damage and/or bodily injuries for which the business is legally responsible. It is specifically designed to protect businesses from claims that result from the services, operations, or products produced by the business. Public liability usually does not provide coverage for automobile accidents, professional mistakes, intentional acts, workmanship, and employee injuries. Most states also do not cover punitive damages. This area of insurance is the most complicated and therefore you should use an agent such as Publicliabilityaustralia.com.au to ensure you are getting the right coverage.
Property insurance is a type of insurance coverage that provides protection for the property/ies that a business owns. This may include fixtures, equipment, vehicles, inventory, furniture, signage/s, buildings, and the like. This type of business insurance will pay for damage to or replacement of property in case of theft, fire, acts of vandalism, or mass destruction events, including earthquakes and floods. Property insurance is especially critical if the business is located in an area that is prone to natural disasters.
There are some limitations, however. Property insurance may not pay for the following:
-Theft of cash that occurred in the site of the business
-Theft committed by business partners or employees
-Loss of movable property, such as tools, equipment, or inventory in transit
-Stolen or damaged company vehicles
-Environmental damage due to oil spills, chemical pollution, and the like
-Product defects due to faulty manufacturing or design
-Equipment breakdown due to employee mistakes, wear-and-tear, and power surges
Note: Many insurance policies offer both property insurance and general liability insurance in a combined package, often called a BOP (business owner’s policy).
Vehicle insurance is a type of policy that provides protection against liabilities due to an accident involving company vehicles. This is necessary for businesses that use vehicles in their operations. Auto insurance provides protection against:
-Injury or death of passengers of the insured vehicle
-Injury or death of third party persons
-Damage to third party property
Employees who drive their own vehicles for business purposes will be covered by their personal insurance in case of any problems unless they are paid specifically for delivering goods and/or services.
Workers’ Compensation Insurance
All businesses that have at least one employee must have workers’ compensation insurance. This is the most basic type of coverage that businesses must have. Workers’ comp provides coverage for expenses that may be incurred in case an employee is injured, becomes sick, or suffers from a health condition because of the environment in the workplace. Workers’ comp will cover both medical fees, retraining costs, and lost wages. In case of death in the workplace, workers’ comp will also pay death benefits and survivorship benefits to the family or beneficiaries of the concerned employee.
Every state mandates businesses to have a type of workers’ comp insurance, which may vary depending on the state. Although there is a lack of federal regulations regarding workers’ comp, state regulations ensure that businesses are aware of what is expected of them. This type of insurance protects businesses from having to take on the costs of medical expenses, lost wages, and other related costs.
Professional Liability Insurance
Professional liability insurance offers coverage for individuals who are professionals in their field. These include doctors, lawyers, accountants, and engineers, to name a few. This insurance policy is meant to protect professionals from litigation and claims that may be filed by clients. Businesses run by professionals in their field will find this type of policy quite useful even if they have general liability insurance since this does not provide protection against malpractice, misrepresentation, or negligence in a professional practice.
PLI may come in different forms, depending on the profession it covers. Medical professionals, for example, may have a medical malpractice policy. Lawyers, accountants, real estate agents, investment advisors, landscapers, tradespeople, and insurance agents may use errors and omissions coverage. Officers, directors, and other professionals in leadership positions may use directors and officers insurance coverage.
Note: PLI does not cover legal liabilities under civil law and criminal prosecution. Coverage is typically listed in the insurance policy, which may exclude certain liabilities.
Product Liability Insurance
Product liability insurance provides coverage against claims of property damage or personal injury that result from a product provided by a business enterprise. It is meant for businesses involved in the production, manufacturing, supply, and/or sale of goods. This type of business insurance covers expenses that may be incurred if someone suffers from an injury or if a property is damaged due to the use of a product. Product liability insurance covers a wide range of industries, including health, real estate, design, consultation, hospitality, leisure, charities, and entertainment, among others.
Key Man Insurance
Key man or key person insurance is a type of life insurance coverage that covers any financial setback a business may suffer due to the loss of an important executive. In this case, the beneficiary of the policy is the company or business itself. A key person usually refers to a person who plays a critical role in the operation of the business. This may be the founder, owner, CEO, president, etc. The person whose absence would have a significant negative effect on the business is considered the key person.
As the beneficiary, the company or business entity receives the payoff in case of the key person’s death. The fund is used to cover expenses such as debts and the costs of paying investors. In case of business closure, the fund may also be used to pay severance to affected employees. In many cases, key man insurance offers a business an option to filing for bankruptcy. The fund may also be used to tide the company over until the key person is replaced.
A cyber insurance policy protects a business from threats due to data loss, data breach, malware, and cyber attacks. This type of business insurance is designed for those who conduct business online. The type of coverage under a cyber insurance policy may differ depending on the product. Usually, it all depends on the type of operations a business has. Businesses that accept digital payments and process credit cards, for example, should look into insurance policies that provide coverage for these issues.