Buyer Guide to Business Insurance

Why Do I Need Business Insurance?
According to recent survey, small businesses pay about $20 billion each year in legal costs out of pocket- costs that in almost all cases that would be covered by insurance.  Liability protection isn’t the only reason insurance is a smart idea- in many cases, certain types are required by law.  Insurance provides protection for your business assets and can even protect you against losses that are associated with interruptions in operation. 

The most commonly purchased types of insurance are Business Owner’s Policies, Comprehensive General Liability Policies, and Specialized Polices for certain types of businesses and industries. 

Business Owners’ Policy: A “BOP” generally contains protections for your business property (buildings, computer systems) and can also provide coverage for periods of non-operation due to certain events, such as fire, theft, or other occurrences.  Most BOP’s also provide liability coverage for third parties up to a certain amount or for certain events. 

Comprehensive General Liability Policy: A “CGL” covers those expenses incurred when your business is at fault for (or negligently causes) a third party injury.  Exact coverage amounts and specifications will be included in the policy, but CGLs will generally cover personal injury medical expenses, fire liability, advertising injury, and damage to products or inventory. 

Other Types of Insurance
Depending on your industry, you may be required to purchase additional insurance for your business or for employees.  Some of the most common types include::

  • Commercial Auto Insurance
  • Workers Comp (required by law in all 50 states for some businesses)
  • Professional Liability/ Errors and Omissions
  • Malpractice Insurance
  • Health or Group Life Insurance for Employees

In addition, you can also purchase Excess Liability or Umbrella Policies that cover amounts beyond the policy purchased.  These policies can reduce the out-of pocket or “gap” costs that arise in cases of property damage or personal injury: according to the Bureau of Labor Statistics, more than 335,000 employees were injured on the job in 2007 due to contact with objects and equipment- many of these businesses had policies that fell short of the amount for required medical care.  Insurance can also be used as an incentive for employees: another recent Bureau of Labor Statistics study showed that of the 58 percent of workers that are offered a group life insurance policy, 56 percent opt to participate.

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