Key Types of Business Insurance to Keep Your Company Protected
Every company faces risks, and it's part of your responsibility as a business owner to ensure you'll be able to weather any potential problems. There are different types of business insurance available to help you achieve that goal.
Just like your auto or homeowners policy, business insurance is the kind of product you hope you never have to use. But without it, you won't be protected from potential financial losses in the wake of an unforeseen event. For example, you may not have enough money to continue operations after paying for a customer's injury on the premises or having to replace equipment damaged in a fire.
That's why it's important to know exactly what types of business insurance you need to keep your company afloat and thriving through any potential risk.
Common business insurance policies
Depending on what type of business you run, there are various types of business insurance that may fit your needs. Make sure you get the best coverage for your needs and avoid paying for insurance policies that don't apply to your business. Here are some of the most common business insurance policies you may need for your enterprise.
Liability coverage protects your business in case a person is injured or their property is damaged on your premises and they decide to bring a lawsuit against your company. If that happens, your liability policy will help cover the costs of defending you and the damages to the claimant.
A property insurance policy protects your business's property in the event of loss due to fire, theft, vandalism or other types of damage or destruction—although you'll likely need to purchase separate flood insurance. If you own the building you operate in or any equipment, tools, computers or other business-related property, you'll likely need to carry this type of insurance.
Professional liability insurance
Commonly known as Errors and Omissions or E&O insurance, professional liability coverage protects business owners who provide services rather than products. Distinct from liability insurance, this type of policy protects you in the event that you're sued for failing to provide or improperly providing your services. Real estate agents, attorneys, hairdressers and wedding planners may need this kind of coverage.
Commercial auto insurance
If your business requires the use of automobiles that carry employees, customers, products or equipment, then this policy can help protect those vehicles. With such a policy, your company automobiles, trucks, vans and the like are protected in the event of damage and collisions.
Workers' compensation insurance
In many states, businesses with employees are legally required to carry workers' compensation insurance. This type of policy provides replacement for lost wages as well as medical benefits to an employee who is injured or becomes sick at work. Providing this benefit to your employees also generally means your workers give up the right to sue you for a work-related injury or illness.
Business interruption insurance
This type of policy protects you from lost income in the event that a covered event affects your business. Covered events can include things like theft, fire, falling objects, lightning or wind. If, for example, a tree falls on your business, destroying the roof and some merchandise and making the building uninhabitable during repairs, business interruption insurance may reimburse you. It could potentially cover the lost income from the destroyed merchandise and any expenses you might incur by temporarily moving your operations to another location.
Business owner's policy
Many insurers offer a package that covers the majority of insurance that small business owners need. This offering, known as a business owner's policy, or BOP, usually includes property, liability and business interruption insurance. Many insurers will allow business owners to adapt their BOP, so they may choose the types of insurance that are most critical to their operations.
Match your coverage to your needs
Determining what business insurance coverage you need depends a great deal on what kind of business you run. It's important to only invest in the policies that match your business needs so you aren't paying for unnecessary coverage.
Having the proper coverage will allow you to focus on running and growing your business—rather than worrying about the what-ifs.
This information is provided for educational purposes only and should not be relied on or interpreted as accounting, financial planning, investment, legal or tax advice. First Citizens Bank (or its affiliates) neither endorses nor guarantees this information, and encourages you to consult a professional for advice applicable to your specific situation.