Understanding Small Business Insurance Policies

Three basic types of small business insurance are necessary to protect your company: property, liability, and workers’ compensation insurance. Your small business insurance quote will be based on the exact mix of these three kinds of coverage. You will also need to purchase workers’ compensation insurance if you have employees or hire contractors, because it is required by law in every state.

Small businesses can take advantage of a Business Owners Policy (BOP), which bundles together property and liability insurance for a reasonable rate. A BOP offers property coverage for standard risks, such as theft or fire. Some perils are usually excluded, including flood or earthquake damage. The BOP will also cover costs for business interruption, including payroll. Last, it will pay to replace equipment, inventory, property, or other assets that are destroyed, damaged, or stolen.

Liability coverage provided with a BOP can be customized based on each company’s needs. Costs for claims made against the company are covered by liability insurance, including legal expenses, medical expenses for injuries, and property damage.

In addition to a BOP, some business owners will want to purchase other types of coverage. For example, attorneys may want to purchase professional liability insurance to protect them in case they are sued for advice given to a client. Dry cleaners may want to buy inland marine insurance to protect them if, for example, their equipment damages any customer clothing. A restaurant owner may wish to purchase employment practices liability coverage in case an employee steals from customers or the company.

When purchasing insurance policies, small business owners must make sure they include all the necessary coverage. Read the fine print carefully. For example, professional liability insurance does not always cover the cost of legal fees or court costs.

Selecting a trustworthy, knowledgeable insurance agent will help you avoid hidden costs or fees. If you belong to a trade organization, ask for personal recommendations from other small business owners. A good agent or broker cannot only protect you from “the fine print” but can also help you identify the potential risks associated with your company and tailor your policy package to meet those specific needs.

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