You’ve got your new business up and running. You’re very excited about it. In fact, your friends and relatives are probably tired of hearing you talk about it. But there is one subject critical to your business’s success that can damper your spirits. The topic of small business insurance. Even now your eyes are starting to glaze over. But before I totally lose your attention, let’s get started on the basics of commercial insurance. But stay focused, for even though it’s not the most exciting subject, it can save your business in its time of need.
BOP Insurance
For many new business owners, a business owner’s policy (BOP) provides the coverage you need in one bundle without breaking the bank. If you’re like many new business owners, you’re not starting out with a fleet of vehicles, large amounts of machinery, or numerous employees. A BOP typically provides you with:
- basic property insurance
- general liability insurance
- vehicle coverage
- business interruption insurance
- flood insurance
This is a good choice for a new business since it covers all the basics and allows for additional coverage as your business grows. Depending on your specific business needs, additional coverage can be included with the policy.
Each insurance policy listed above is explored in depth below, along with additional policies common to businesses.
Business Property Insurance
This insurance provides coverage for loss from a fire, theft, or vandalism. This insurance protects your assets including:
- computer and office equipment
- digital data
- records
- furniture
- physical inventory and supplies
- outdoor fixtures (signs and fences)
Digital data is covered only when damage is caused to the computer system containing it. A general failure of software or hardware is not covered. Flood insurance can be added to your property insurance as an endorsement.
If you run your business out of your home you should consider insuring your business assets. Your homeowner’s policy probably won’t cover your business assets sufficiently, if at all.
Commercial General Liability Insurance
Commonly known as trip and fall insurance, this insurance protects you in the event you are sued.Should your business be liable for an injury to a person in your business or damage to property this insurance will cover you. But this protection covers much more, for your business can be sued for any number of reasons. Some include:
- personal injury
- slander, libel
- faulty products
- errors and omissions
- data breach
Errors and omissions insurance covers negligence on your part. This offers protection in the event you are accused of failing to perform your professional services. For example, if you write a program for a client and it causes their server to crash, you may be held liable. Or if you are a wedding planner and reserve the banquet facility for the wrong date, this insurance comes into play should you be accused of wrongdoing. In general, anyone providing a professional service or offering advice should carry this insurance protection.
Data breach insurance protects you in the event private data is compromised. Many small businesses, especially online retailers, handle a massive amount of personal data. Increasingly, hackers are attacking small and medium sized businesses because they are easier targets than large corporations.
Business Interruption Insurance
In the event of a disaster your assets and property are likely covered. However, if you are unable to conduct business because of a fire or natural disaster, how will you make money? This is the gap that business interruption insurance fills. This insurance is not sold as a stand-alone policy but is additional coverage attached to your business property insurance.
For this insurance coverage to come into play there must be physical damage that is covered in your business property insurance. Businesses without physical damage but closed or facing reduced business for other reasons may not be covered. This can include keeping the doors shuttered because of a power outage or a mandatory evacuation.
For this reason, look into purchasing extended business interruption insurance. It will include coverage for these other types of disruption:
- Service interruption – coverage specifically for the loss of business from a disruption of utilities
- Contingent business – coverage for loss of business resulting from property loss at a key supplier
- Civil authority – coverage in the event the government denies access to a business, as in a mandatory evacuation
Workman’s Compensation Insurance
By law, unless you live in Texas, employees are required to carry insurance benefiting employees that suffer work related injuries or illness. Covered injuries can range from tripping over a stack of materials, to carpal tunnel syndrome to exposure to chemicals. Employees are not just covered while working inside the business. They are also covered while on business trips, while running business errands or while out on a service call.
Commercial Auto Insurance
If you provide company vehicles or if your employees use their own vehicles for your business, you need to have commercial auto insurance coverage. Business vehicles are not covered under your business property insurance or your personal auto insurance.
Whew! You Made It
A well designed business insurance policy can include a mass of details. Treat it like you would a new piece of equipment. Familiarize yourself with the details. Learn it in and out. Every so often, upgrade it if the need arises. This way, when you go to use it, there won’t be any surprises. If you have any questions, be sure to ask your agent. Don’t wait until you file a claim to find out what’s not covered.
