In: Accounting
All companies buy property-casualty (p/c) insurance in order to protect them from unexpected losses. Pick five common lines or types of business insurance under the Commercial Package Policy. Instructions: Create a memo to a hypothetical boss that is 3-5 pages in length. Describe the coverage to him/her in terms of what it covers, as well as options that the coverage offers. References are not needed.
Business insurance coverage protects businesses from losses due to
events that may occur during the normal course of business. There
are many types of insurance for businesses including coverage for
property damage, legal liability and employee-related risks.
Companies evaluate their insurance needs based on potential risks,
which can vary depending on the type of environment in which the
company operated
From the day an entrepreneur starts a business, he exposes himself
to certain risks. Even before the first employee is hired, a
business is at risk, making it important to have the right
insurance in place. One lawsuit or catastrophic event could be
enough to wipe out a small business before it even has a chance to
get off the ground.
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. 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 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.
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
. 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
Business interruption insurance.
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.
At the very least, every small business needs property insurance and liability insurance – even if you work out of your home. If you have business vehicles, you’ll need business vehicle insurance. And if you have employees, most states will require you to have workers’ compensation insurance
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