What Does Business Insurance Cover? Plus Why Is It Important?

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When opening a business, many tasks need to be completed before you can open the doors. Many of these tasks are client or customer-facing — things such as manufacturing products, establishing a website, and deciding on the location. 

Others are more internal such as hiring a team, purchasing office supplies, and obtaining business insurance. 

But what does business insurance cover? Which coverage is right for your business? Many coverages can help protect you and your employees, but the process of choosing can be confusing and often overwhelming. 

It’s often best to meet with a licensed business agent who is well versed in the many coverages that your business may need. 

What Does Business Insurance Cover

There are different types of commercial insurance coverage available to businesses in every industry. Each company has various risks, so no one policy will fit everyone. There are the basic coverages that blanket certain risks; however, they apply differently depending on the industry as each state has different regulations. 

Let’s take a quick look at some of the most common coverages most businesses will need. 

General Liability Coverage

A foundational part of your overall business insurance coverage is general liability coverage. This policy helps to protect your business from claims against your company that pertain to third party property damage, third party bodily injury, advertising injury, reputation harm, etc. 

When an accident or injury causes a third party to file suit against the company, these coverages will help to cover the costs of legal teams, the cost of evidence, or to pay out judgments and settlements. 

This coverage is not required by law; however, if your company does not have the funds to cover such costs, then there may be no need for such coverage. Most businesses, however, benefit from having this coverage. 

One thing to keep in mind is that in the contracting industry (or any form of service where you provide manual labor), some companies may require that you obtain it before beginning service. 

Professional Liability Insurance

Different from general liability insurance, the professional liability insurance coverage helps to protect your business from negligence, such as failure to provide the services promised, mistakes made in the work you (or your team) performed. 

Product Liability Insurance

When your business manufactures products, there is always the risk that a product will malfunction and cause injury or illness to others. This particular coverage helps to cover the costs associated with such claims. 

Business Interruption Coverage 

Mother nature doesn’t care that you have a business to run. Inclement weather happens all the time and often derails a companies efforts to run their day to day business.  This particular coverage helps to recover the costs that are lost during such occasions.

Fleet Vehicle Coverage 

Whether you own delivery services, taxi service, or other business that needs a fleet of vehicles this coverage is for you. This coverage will help protect your driver from liability in the event of an accident. 

It helps to cover any damages to the property of others, any medical costs associated with an at-fault accident. It helps protect the company from suit should the injured party decide to file a claim. 

Key Person Insurance

If there is one person that your company relies on to be successful, then that individual is considered a key person in your company.  You have to ask yourself, “If something should occur and that person was no longer able to do their job, would my company suffer financially?”

If the answer is yes, then key person insurance is precisely what you need. This coverage provides funds to help the remaining partners with business expenses associated with such a loss. 

Workers Compensation

If you have any employees, you will need workers’ compensation coverage. Some industries have a higher risk than others. Yet, no matter what industry you are in, it’s good to make sure that your employee’s medical costs are covered should they injure themselves while at work. 

Most states require this coverage for businesses that have more than a specified number of employees. Make sure to check with your state on their particular regulations.   

Umbrella Coverage

For those who want added protection, an umbrella policy helps to extend your coverages when the claim falls beyond the limits of the plan you have in place. 

For example, if one of your fleet vehicles is involved in an auto accident, and the other injured party decides to sue your company for negligence. Still, your policy only covers 500K, and they’re suing for a million, the umbrella policy would cover the remaining amount of the suit. 

Home-Based Businesses

With more people deciding to work virtually from their homes, the need for home-based business insurance coverage has increased. Your regular homeowners’ insurance will not cover damages done by a home-based business.

If you use your home to store your product, you should also check into insurance coverage that protects against fire, theft, and vandalism, as this would not be covered under a normal homeowner’s insurance policy.

The Overall Benefits of Business Insurance

There are other benefits to having business insurance other than the obvious coverages for financial loss. When a business purchases insurance coverage, it sends a message that you are a legitimate business. 

There is something about being able to tell your clients that you are licensed and insured, which adds credibility to your business.

Having coverage tells your clients (and employees) that you have their best interest at heart. And the right agent can point you in the right direction without overloading you with coverages that you don’t need. 

Staying Up to Date on Insurance Changes

One thing the right insurance agent can do for you helps you stay up to date on changes in insurance regulation. As new laws are passed, they may leave you wondering what does business insurance cover. 

If you want to learn more about how insurance coverage can benefit you give us a call or check out our website for more information. 

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