Small business insurance, sometimes called commercial insurance, helps cover a business’ assets, property and income against certain losses. A business owners policy (BOP) offers three basic types of coverage to help protect a business: business property coverage, general liability coverage and business interruption coverage.
If you’re a small business owner, you may be able to buy additional coverages to customize your policy based on your specific operation and needs.
Insurers often combine a number of insurance coverages into a package that is sold as a single contract. The most common policy for small businesses is the Businessowners Policy (BOP).
The BOP combines coverage for all major property and liability insurance risks as well as many additional coverages into one package policy suitable for most small businesses. The term “BOP” specifically refers to insurance policy language developed (and revised as needed) by experts at ISO. ISO provides sample insurance policy language, research and a variety of other products to insurance companies.
Why do I need small business insurance?
Small business insurance is there to help you in the event of unforeseen claims for losses or damages. Depending on the type of cover you have in place, it can help you get back up and running, and could cover any loss of profits if you have to close for a period.
Some types of cover are a legal requirement, like employers’ liability insurance if you employ any staff and motor insurance if you use vehicles for work. But what other cover you need will depend on your business. It could be worth protecting yourself against:
– Claims from customers
– Business interruptions
– Damaged property or stock
Major Coverages
Most small businesses need to purchase at least the following four types of insurance.
1. Insurance
Property insurance compensates a business if the property used in the business is lost or damaged as the result of various types of common perils, such as fire or theft. Property insurance covers not just a building or structure but also what insurers refer to as personal property, meaning office furnishings, inventory, raw materials, machinery, computers and other items vital to a business’s operations. Depending on the type of policy, property insurance may include coverage for equipment breakdown, removal of debris after a fire or other destructive event, some types of water damage and other losses.
2. Liability Insurance
Any enterprise can be sued. Customers may claim that the business caused them harm as the result of, for example, a defective product, an error in a service or disregard for another person’s property. Or a claimant may allege that the business created a hazardous environment. Liability insurance pays damages for which the business is found liable, up to the policy limits, as well as attorneys’ fees and other legal defense expenses. It also pays the medical bills of any people injured by, or on the premises of, the business.
3. Business Auto Insurance
A business auto policy provides coverage for autos owned by a business. The insurance pays any costs to third parties resulting from bodily injury or property damage for which the business is legally liable, up to the policy limits.
4. Workers Compensation Insurance
In all states but Texas an employer must have workers compensation insurance when there are more than a certain number of employees, varying from three to five, depending on the state. Workers comp insurance, as this coverage is generally called, pays for medical care and replaces a portion of lost wages for an employee who is injured in the course of employment, regardless of who was at fault for the injury. When a worker dies as a result of injuries sustained while working, the insurance provides compensation to the employee’s family. An extremely small business, such as one operated by one or two people out of a home, may not need workers compensation insurance. But it often needs more property and liability insurance than is provided in a typical homeowners policy.
ADDITIONAL COVERAGE
You may be able to add additional coverages onto your business owners policy. Available coverages may include:
- Data compromise coverage
- Employment practices liability coverage
- Equipment breakdown coverage
- Outdoor property coverage
- Product liability and/or professional liability coverage
Talk to your agent about your specific business insurance needs, and he or she can help you choose the coverages to customize your policy.
HOW MUCH DOES SMALL BUSINESS INSURANCE COST?
The cost of a small business insurance policy depends on many factors. These factors may include the type of business you’re insuring, the types of optional coverage you add to your policy and the deductibles and limits you select for each coverage.
Do I still need business insurance if I work from home?
It depends on the type of business you run. If you have equipment or store stock at home, you could find your regular home insurance policy won’t cover you for loss or damage and you might even find that working from home cancels out your home insurance policy should you need to claim.
If you just work a few days from home each week, then your home insurance policy should cover you. But if you invite customers into your home, then it’s worth looking at public liability insurance because this will help cover you if a client suffers an injury or damage to their property and makes a claim.
Best Overall Small Business Insurance: The Hartford
For the past 30 years, The Hartford has had a team of specialists in place to help better serve the unique insurance needs of small business owners. The efforts have paid off because now The Hartford receives high ratings from customers on quality service and claims support. The Hartford also has a broad selection of specialized insurance packages based on industry and profession.
Best Small Business Insurance for Cost: Next Insurance
Next Insurance is the leading digital insurance company for small businesses. They are reshaping the way small business insurance is delivered, enabling customers to buy and manage their insurance all online. Next Insurance also offers quick access to a certificate of liability insurance (COI), which is convenient when needing to prove you have insurance.
Best Small Business Insurance for Online Service: Insureon
Insureon is the best insurance provider for small businesses who want online access, in addition to broad, tailored coverage for below-average costs. Insureon is able to deliver quality commercial insurance by partnering with multiple carriers to bring the ideal coverage at the right price for its customers.
What is professional indemnity insurance and do I need it?
It’s not an insurance that every company will need. It applies to businesses that offer knowledge, skills or advice as part of their work. It might be needed by a self-employed individual like a consultant, an accountant, or a company. Certain industries require professionals to have this insurance under regulation, and sometimes client contracts will specify a certain level of professional indemnity insurance is necessary.
