When starting a business, one of the essentials is the purchase of appropriate insurance. With all of the options available, and some mandatory insurance requirements, this is an area that takes a bit of study. The goal is to provide full protection of the business investment without paying more than necessary.
Reviewing the needs of your particular venture with an insurance advisor will help to ensure adequate protection. After deciding on the type of insurance and amount of coverage needed, control costs by shopping around for the best rates.
Begin with the insurance premiums that are required by law. All states have insurance mandates for business owners, some more stringent than others. After this, investigate insurance needs for your business that are not be legally required but may still be a good idea. It is the responsibility of the business owner to properly insure and protect their investment.
Government-Mandated Insurance for Businesses
Workers’ Compensation Insurance
Every state requires businesses to carry this type of. It protects employees in case they suffer an injury or disability related to the job. The insurance would be a good idea even if it weren’t required. Workers’ Compensation insurance also protects the business from lawsuits brought by employees or their families in case of injury or death, as long as the employer is not negligent in providing a safe working environment.
Business Auto Insurance
Just as a private vehicle must be insured, all states have regulations regarding commercially owned and operated automobiles.
The policy must cover both the vehicle and the drivers. Requirements vary with the type of company and the way the vehicles are used. For complete information on requirements in a particular state, visit the Department of Motor Vehicles website for that state.
Businesses operating in California, Hawaii, New York, Rhode Island or New Jersey must also purchase disability insurance. Should the business owner or an employee become disabled and not be able to work, the disability insurance replaces a portion of that individual’s income.
Business Insurance that is Needed but Not Mandated
Property and Liability Insurance
Business owners make a major investment in property, including buildings, equipment and furnishings needed to operate. This type of insurance covers the replacement of property lost due to fire or theft. It also provides protection from lawsuits by visitors or customers injured on the property.
Errors and Omissions Insurance
A business that handles the property or documents of customers, or provides certain services to them, may need this type of insurance. If an error or omission by a company employee or business owner causes a loss to that customer, the insurance covers liability claims.
Background checks don’t always protect a company from potential actions by its employees. The company is still liable if an employee intentionally harms a third party. This insurance covers liability in the case of criminal acts by employees.
Business Owner’s Insurance
A business owner may be vulnerable to a personal liability suit due to inadvertent damages. This insurance protects the business owner in case of such a suit.
Other Insurance to Consider
Many companies will also want to reduce their risk by investing in Business Continuation Insurance, Product Liability Insurance, or Key Executive Insurance. The amount and type of insurance a business needs will be decided by many factors unique to that venture.
The best approach in deciding about business insurance is to consult with an insurance advisor who’s qualified and experienced in protecting small businesses.