Business Insurance: Everything You Need to Know

If you’re setting up or running a small business, you’ve got several overheads to consider, but business insurance should not be an afterthought. It makes up the difference between the assets you have and your liabilities.

Business insurance can make the difference between staying open or closing. But with so many types of business insurance available, it can be difficult to know which type is right for you.

Our guide to business insurance will take you through the most common types. This will help you buy business insurance that’s right for your needs.

Business Insurance 101: What Do I Legally Need?

Business insurance doesn’t just cover you when things go wrong. The federal government requires that businesses have certain insurances from the get go.

If your business has employees, you must have:

• Workers’ compensation insurance
• Unemployment insurance
• Disability insurance

State laws sometimes make exceptions for businesses with small numbers of employees i.e. less than three. State law, however, may also require that you have additional forms of insurance. This often depends on the type of business you are running.

For example, if your business owns vehicles, a commercial auto insurance policy is a requirement. Certain professions require professional liability insurance. Businesses that sell alcoholic products must take out liquor liability insurance.

It’s important to check which insurances are a requirement in your state before you open. As well as these compulsory insurances, there are several types of insurance that business owners are wise to consider.

Types of Business Insurance

One of the best business insurance tips we can give is to make sure you’re covered from day one. It only takes one flood, car crash, or lawsuit to derail the most promising business. Having appropriate small business insurance in play from the start will get you off on a strong footing.

General Liability Insurance

General liability insurance is sometimes called business liability insurance. It protects all kinds of businesses from financial loss. This could be because of:

• Bodily injury
• Advertising injury, such as libel and slander
• Damage to property
• Lawsuits
• Medical payments

When you buy business insurance, the company will create your quote based on several factors. These include the type of work your business does, where your business is based, and how many employees you have.

If you’re running an LLC, it’s true that you have some protections under the law. However, while you may personally be protected, someone could still sue your business. General liability insurance could provide protection if a third party makes a claim.

Profession Liability Insurance

Do you provide a professional service to customers? This could include businesses such as:

• Accountants
• Engineers
• Realtors
• Architects
• Consultants

In some states, professional liability insurance is mandatory. For certain professionals, malpractice insurance may be a requirement. This would include lawyers and medical practitioners.

This type of business insurance protects you from client lawsuits that could result from:

• Budget overruns
• Breach of contract
• Claims of negligence
• Unfinished work
• Missed deadlines
• Errors

Our business insurance advice: don’t assume because it’s not a legal requirement, you don’t need it. Professional liability insurance provides a great safety net for any service-based business. Some clients will also insist that you have this insurance before they’ll start working with you.

Commercial Property Insurance

If your business owns any type of commercial property, you need commercial property insurance.

It doesn’t just cover the buildings, but covers your physical assets as well. This could include your computer equipment, machinery, tools, inventory, furniture, records, and archives.

There are two main types – named perils and open perils policies. Named perils policies cover costs resulting from perils specifically named in the policy.

An open perils policy is more broad-ranging. It provides better coverage but will cost you more. Whether you have a home office or a tower block, it’s a good idea to buy business insurance that protects these assets.

Business Owners Policy

Most businesses require one or more of the above policies. It can be complicated working with multiple individual policies to provide the coverage you need. One of the best business insurance tips is to combine these into one policy – a business owners policy.

These policies are great for owners of small to medium-sized businesses. They combine the following types of insurance into one policy:

• General liability insurance
• Commercial property insurance
• Business interruption insurance

The latter covers you in the event a covered disaster results in loss of income.

No business insurance advice would be complete without a word on what this does not cover. It does not provide mandatory workers’ compensation insurance. Neither does it provide life, health, or disability coverage for workers.

You will also need to arrange separate professional liability insurance.

However, it merges three important insurances into one manageable package.

Product Liability Insurance

Is your business involved in manufacturing, wholesaling, distributing, or retailing products? If so, you need this type of insurance.

Even with the highest of production standards, defective products can cause injury or bodily harm. This insurance protects you.

No matter how small you are starting, this is a type of small business insurance that you can’t afford to be without.

Home-Based Business Insurance

Over the recent past, more and more entrepreneurs have started businesses from their own homes. This type of small business insurance is often an add-on to existing homeowner’s insurance.

If you’re running your business from home, it’s important you are covered against third-party claims. If a client trips and falls during a meeting at your home, this will cover you.

Choose the Right Business Insurance for Your Needs

Choosing business insurance can be complicated, and it’s very important to ensure that you comply with federal and state requirements before starting your business.

Additional policies provide protection that can keep you in business, even if unforeseen events occur. But before you buy business insurance, make sure you get the highest quality business insurance advice.

At McMahon Insurance Agency, we’re fully independent and we’re proud to serve businesses in Delaware, New Jersey, and Pennsylvania. Contact us today to request more information or to get a quote for your business insurance needs.