Question

Research, identify, and describe appropriate insurance plans for your small business by discussing the following. Note that I am not referring to employee insurance here, I’m referring to business insurance policies. Describe the type/types of policy/policies that may be considered a “must” for all small businesses. Note that if you plan to get a business loan, such policies may be required. Describe any company-specific risks a small company such as yours needs to mitigate. Would such risks be covered with the policy/policies discussed in #1? While considering the coverage needs for your small business, research the cost of insurance and share your findings. Be sure to reference your findings using APA format standards.

Answer 1

When you’ve taken the steps to build your business, it is important to protect that investment of time and money from any risks. A number of different types of business insurance may be purchased, either as part of a policy or as an add-on, to help protect your small business. Here is a comprehensive list of insurance types that a business must have in place as soon as possible. The topic covers the risk involved, company specific risks that need to be mitigated as under:-

1. Professional liability insurance: Professional liability insurance, also known as errors and omissions (E&O) insurance, covers a business against negligence claims due to harm that results from mistakes or failure to perform. It covers claims that are not included under a general liability policy. Some states require this type of insurance — for example, malpractice insurance for lawyers or medical professionals. Accountants, architects, graphic designers, and real estate agents or brokers also benefit from having professional liability insurance. Professional liability coverage includes legal defense costs and payment of damages if you are found liable. There is no one-size-fits-all policy for professional liability insurance. Each industry has its own set of concerns that will be addressed in a customized policy written for a business.

2. Property/ Commercial Property insurance: Whether a business owns or leases its space, property insurance is a must. This insurance covers equipment, signage, inventory and furniture in the event of a fire, storm or theft. However, mass-destruction events like floods and earthquakes are generally not covered under standard property insurance policies. If your area is prone to these issues, check with your insurer to price a separate policy.

Commercial property insurance is a type of insurance used to cover commercial property, protecting that property from major threats such as fire, theft and natural disasters. Included under “property” would be any of the physical goods connected to the business, including building(s), signs, equipment or other goods with value. The employees’ personal property is also covered when it is on-site. There are three types of commercial property insurance policies: basic form, broad form, and special form. Basic form covers ordinary damage from fire or wind. Broad form covers everything under basic, plus expanded coverage such as water damage from natural or mechanical sources. Special form covers everything except specific events as specified in the policy, such as infestations or terrorism.

Whether you’re running a home-based business with one employee, or a small business with several dozen employees, having the appropriate liability coverage to protect yourself, your business property, and your customers is vital. Start with a basic generally liability business insurance policy. With the assistance of your insurance broker, you can build a comprehensive policy that protects your business from potential risks and helps you handle their aftermath.

3. Workers’ compensation insurance: Once the first employee has been hired, workers’ compensation insurance should be added to a business’s insurance policy. This will cover medical treatment, disability and death benefits in the event an employee is injured or dies as a result of his work with that business. Even if employees are performing seemingly low-risk work, slip-and-fall injuries or medical conditions such as carpal tunnel syndrome could result in a pricey claim.

4. Home-based businesses: Many professionals begin their small businesses in their own homes. Unfortunately, homeowner’s policies don’t cover home-based businesses in the way commercial property insurance does. You may be assuming that because your small business is operated from your home that it is covered by your home owner’s insurance, but this is rarely the case. Having the proper business insurance coverage is vital to protect yourself and your small business. Your choice of business insurance will vary depending on the kind of business you are operating, how many employees you have, what you produce or offer as a service, even whether clients come to your home to do business. Some important types of insurance coverage that may be part of a customized home-based business insurance policy include property and liability insurance, business vehicle insurance, and worker’s compensation insurance.

5. Product liability insurance: If your business manufactures products for sale on the general market, product liability insurance is a must. When claims or suits are made against the products a company produces, product liability insurance is an important type of business insurance coverage. Product liability insurance protects your company if bodily injury or property damage are caused by a defective or malfunctioning product, or by warnings or instructions that are flawed or insufficient.

Whether you produce food, a type of machine, medicine, or anything sold to businesses or the public, it is important to have this type of insurance coverage. While product liability is included in most general liability policies, you may need to purchase it separately if your business produces potentially harmful products, such as insecticides or pharmaceuticals. Even a business that takes every measure possible to make sure its products are safe can find itself named in a lawsuit due to damages caused by one of its products. Product liability insurance works to protect a business in such a case, with coverage available to be tailored specifically to a specific type of product.

6. Vehicle insurance: If company vehicles will be used, those vehicles should be fully insured to protect businesses against liability if an accident should occur. At the very least, businesses should insure against third-party injury, but comprehensive insurance will cover that vehicle in an accident, as well. If employees are using their own cars for business, their own personal insurance will cover them in the event of an accident. One major exception to this is if they are delivering goods or services for a fee. This includes delivery personnel.

7. Business interruption insurance also called Commercial General Liability: A Commercial General Liability insurance policy, sometimes abbreviated to a CGL policy, protects your small business from financial losses if property damage or any injuries occur that were caused by your employees, services, or business operations. A CGL policy will cover the costs of any legal fees plus the cost of damages if your business is found liable for what occurred. Standard policies include coverage of bodily injury and property damage, personal injury and advertising injury, and medical payments.

If a disaster or catastrophic event does occur, a business’s operations will likely be interrupted. During this time, your business will suffer from lost income due to your staff’s inability to work in the office, manufacture products or make sales calls. This type of insurance is especially applicable to companies that require a physical location to do business, such as retail stores. Business interruption insurance compensates a business for its lost income during these events.

By having the right insurance in place, a business can avoid a major financial loss due to a lawsuit or catastrophic event. Check with your insurer to find out what forms of insurance are advised for your type of business and put those plans in place as soon as possible.