Business Insurance What Does It Cover and How to Choose the Right Policy

Business insurance is a crucial aspect of running a successful business, providing financial protection against unforeseen events and liabilities. This type of insurance can cover losses due to natural disasters, accidents, and lawsuits.

Business insurance policies can be tailored to fit the specific needs of your business, covering various risks such as property damage, equipment breakdowns, and workers' compensation. Some policies may also include coverage for business interruption, cyber attacks, and professional liability.

Choosing the right business insurance policy requires careful consideration of your business's unique needs and exposures. It's essential to assess your business's risks and select a policy that provides adequate coverage to protect your assets and livelihood.

Business insurance can be a complex topic, but understanding what it covers can help you make informed decisions about your business.

Commercial property insurance protects your business' physical assets against loss or damage from a broad range of causes. This includes property such as buildings, equipment, and inventory.

Named perils policies only cover losses or damage caused by specific perils listed in the policy, whereas all-risk policies cover loss or damage caused by any peril unless specifically excluded.

You'll also want to consider your deductible options, which can affect your premium. The deductible is the part of the loss you must pay when you make a claim, and it's essential to consider this when selecting a deductible amount.

Cyber threats are on the rise, and businesses need to be proactive in protecting themselves. Cyber liability insurance can provide coverage against expenses that arise if a person claims a product your business sold, made or distributed caused bodily injury, unlawful death or property damage.

Here are some common types of business insurance that can help protect your business:

Business interruption insurance can also provide financial protection in the event of unexpected disruptions or closure. This can cover lost income, expenses incurred due to interruption, and events such as natural disasters, fire or flood damage, power outages & cyberattacks.

Any business can be sued for a variety of reasons, even if they did nothing wrong. Customers, employees, and other businesses could file a lawsuit against your company.

Some industries and professions require business owners to have specific types of insurance, such as medical professionals needing medical malpractice insurance. This is often mandated by law.

Registering as an LLC can protect your personal assets, but it won't shield your business assets from a lawsuit. Business liability insurance can help protect your business's assets.

Even if you're not required to have business insurance, it's still a good idea to get it to protect your business from costly lawsuits and damages.

Business insurance offers various types of coverage to protect your business from different risks. CGL (Commercial General Liability) insurance is a primary type of business insurance that covers liability losses, including bodily injury, property damage, and personal injury.

There are two main types of CGL coverage: occurrence and claims-made. Occurrence coverage protects a business from any covered incident during the policy period, regardless of when the claim is reported. Claims-made coverage, on the other hand, covers claims that occur and are reported within the policy period.

Business owners can also consider adding additional coverage options, such as workers' compensation insurance, professional liability insurance, commercial auto insurance, and cyber liability insurance, to their BOP (Business Owners' Policy) or CPP (Commercial Packet Policy) to provide comprehensive protection for their business.

Here are some of the key types of business insurance:

Automobile insurance is a must-have for businesses that use vehicles for work. The minimum limits for commercial auto insurance are 30/60/25.

Almost every business uses a vehicle of some type in performing some aspect of the job. This can include private passenger, van, bus, or tractor trailer vehicles.

A business needs to insure against damage to their vehicles, injuries to third parties, damage to cargo, and injuries to persons riding in their vehicles. Rating of commercial auto policies is different from personal auto policies.

Most insurance companies consider the driving record of the employees when determining the business' rate for the policy. The condition of vehicles, driver experience, driver training, driver supervision, hazards of the route, loading and unloading, motor vehicle records, use of non-owned vehicles, and vehicle security are all factors used in determining the rate.

Commercial auto insurance can provide coverage for company vehicle crash-related expenses, such as medical expenses and vehicle damage. However, it does not provide coverage for vehicles that your business does not own, such as rented vehicles or employees' personal vehicles that are used for work errands.

Hired and non-owned auto insurance can expand your business's coverage to include these non-company vehicles. This can provide peace of mind for business owners who use non-owned vehicles.

Fire and extended coverage policies are designed to protect real and business personal property from physical loss. This type of protection is typically acquired from a fire and extended coverage insurance policy.

There are two types of policies extending coverage: named peril or all risks. Named peril policies cover specific perils, such as fire, while all risks policies cover any unforeseen event.

Specialty endorsements can be added for different businesses, taking into account their unique needs and circumstances. The type of construction, fire protection available, and use of the premises are all important considerations for insurance companies.

The likelihood of someone causing their own loss, contents, equipment, and emergency planning are also crucial factors in determining the level of coverage needed.

Businesses can take steps to prevent losses by customizing their insurance policies to meet their specific needs, as mentioned in Example 2. This can include adding coverage options such as Workers' Compensation Insurance, Professional Liability Insurance, Commercial Auto Insurance, and Cyber Liability Insurance.

Regularly updating your alarm system or fire prevention system can lower your insurance premiums, as suggested in Example 5. Investing in workplace health and safety measures can also reduce the risk of accidents and subsequent claims.

Creating a disaster preparation plan can help minimize losses in the event of a disaster, which can be a major financial blow to a business. Engaging in human resource intervention, such as providing training and resources for employees, can also help prevent workplace injuries and subsequent claims.

Here are some ways to prevent losses and lower your insurance costs:

Inland marine insurance is used to cover property that's mobile or in transit, which can include items like bridges and radio and TV antennas.

It's the first line of insurance to introduce the concept of "all risks" or direct physical loss.

Inland marine policies can cover physical loss, and some may also cover business interruption.

Valuation of property insured can be done by actual cash value, replacement value, agreed value, or other types of valuation.

Inland marine insurance covers property while transported via land or waterways.

It may be purchased as an add-on to an existing business insurance policy or as a separate policy.

Inland marine coverage can repair or replace items if damaged by fire, wind, theft, water damage, and hail.

Inland marine insurance is especially beneficial for independent truckers who are responsible for their cargo during transport.

Cargo insurance, which is a form of inland marine insurance, protects goods while in transit and is especially beneficial for independent truckers.

Package policies are a great way for businesses to save money and get better coverage. These policies combine several different coverages under one policy, such as fire and extended coverages, general liability and inland marine.

Most insurance companies offer package policies that are tailored to specific types of businesses. This means you can get a policy that's designed specifically for your industry or business type.

One of the main benefits of package policies is that they can offer better coverage than individual policies purchased separately. Plus, you only have to pay one premium and deal with one anniversary date.

Here are some common types of coverage that may be included in a package policy:

It's worth noting that package policies are often designed for businesses with simpler operations, while larger or more complex businesses may need more customized coverage.

CGL insurance comes in two main types of coverage: occurrence and claims-made.

Occurrence coverage protects a business from any covered incident during the policy period, regardless of when the claim is reported.

Claims-made coverage covers claims that occur and are reported within the policy period.

Here's a breakdown of the two types:

Umbrella insurance provides additional liability coverage beyond the limits of other insurance policies. This extra layer of protection can be especially valuable in scenarios where a significant liability claim or lawsuit arises.

Umbrella insurance kicks in when the limits of your primary policies are exceeded, such as in a major car accident involving multiple vehicles. Without umbrella coverage, you could be left personally responsible for covering expenses that exceed the limits of your primary policies.

Umbrella insurance is a form of excess insurance that expands the policy terms and provides broader coverage to encompass losses not outlined in the policy. This means that liabilities exceeding the policy scope become the policyholder's responsibility, not the insurer.

For example, if you're visiting another country and get into an accident using a rental car, your umbrella policy may cover auto liability in that area, even if your commercial auto policy doesn't include coverage for these territories.

To ensure continuous coverage, it's essential to purchase umbrella insurance along with your primary policies, such as commercial general liability, auto liability, or workers' compensation. This way, you can avoid being left personally responsible for covering expenses that exceed the limits of your primary policies.

Here are some key benefits of umbrella insurance:

Workers' compensation insurance is a must-have for any business with employees. It provides benefits to employees who become injured or ill while doing their job, covering medical costs, lost wages, and rehabilitation costs.

If an employee sues your business for an illness or injury caused by work-related incidents, workers' comp limits your company's liability for legal claims. This can be a huge relief for business owners, as it helps protect them from costly lawsuits.

Workers' comp doesn't cover claims of gross negligence, discrimination, malicious intent, wrongful termination, failure to promote, intentional injury, emotional injury, injuries from fights caused by employees, or injuries occurring during commute or intoxication.

The right coverage amount for workers' comp depends in part on state laws and the makeup of your workforce. In North Carolina, for example, any company with three or more employees is required to carry worker's compensation insurance.

Employers' liability insurance is another important policy that helps offset costs associated with employee injuries or illnesses. It covers lawsuits that may result from an employee injury or illness, which can be a significant financial burden for businesses.

Here are some exemptions for employers' liability insurance:

In the United States, most states are required to provide some form of workers' compensation, and employers are responsible to pay premiums.

Cybersecurity insurance is a type of business insurance that provides financial protection against cybercrime and cybersecurity issues. It can help cover the costs of incident response, legal fees, and system damage.

Cyber liability insurance is designed to cover your company's liability in the event of a cybersecurity breach. This can include sensitive information like Social Security numbers, credit card numbers, and account information.

Cyber liability insurance typically covers costs associated with notifying customers about a data breach, restoring personal identities, and recovering compromised data.

Cyber insurance policies often include coverage for expenses like forensic investigations, legal fees, customer notification, and regulatory fines. This can help your business mitigate the aftermath of a cyberattack or data breach.

Businesses can benefit from cyber insurance by having a financial safety net in case of a cyberattack. This can help prevent financial ruin and maintain customer trust and confidence.

Here are some examples of what cyber insurance policies may cover:

There are several types of business insurance to consider, each with its own unique features and benefits.

CGL insurance, for example, comes in two main types: occurrence and claims-made. Occurrence coverage protects a business from any covered incident during the policy period, regardless of when the claim is reported.

If you're looking for a more comprehensive policy, you might consider a Business Owners' Policy (BOP). BOPs bundle essential coverages from business liability, commercial property, and business interruption insurance, among others.

A BOP can also include additional coverage options, such as workers' compensation insurance, professional liability insurance, commercial auto insurance, and cybersecurity insurance.

Cybersecurity insurance, in particular, provides coverage against legal costs and damages related to cybercrime and cybersecurity issues.

Here are the main types of CGL coverage:

And here are some additional coverage options that can be added to a BOP:

Errors and omissions insurance is a must-have for businesses that offer professional services. It provides coverage against lawsuits based on a client's claim of inadequate work or negligent action.

This type of insurance can pay your legal fees, court costs, and any settlements up to the amount specified in your coverage.

Professional liability insurance, also known as errors and omissions insurance, usually covers libel, slander, misrepresentation, negligence, and inaccurate advice. These are all common risks that businesses face when providing professional services.

If you're a business owner, it's essential to understand what's covered under your errors and omissions insurance policy. This will help you make informed decisions and minimize your risk exposure.

Here's a breakdown of what's typically covered under professional liability insurance:

Contractors Pollution is a type of liability insurance that protects contractors from pollution-related risks after an accident involving toxic materials.

This type of insurance was once included under Comprehensive General Liability (CGL) policies, but when separate policies emerged in the 1980s, contractors had to start purchasing Contractors Pollution Liability (CPL) separately to protect against environmental risks.

A CPL policy typically covers cleanup costs, bodily injury, property damage, and legal defense costs.

Some common pollutants that are usually included in a CPL policy are liquid, solid, or gaseous contaminants, or irritants such as fumes, smoke, vapor, waste, chemicals, mold, bacteria, and asbestos.

Here are some of the key protections offered by a typical CPL policy:

Cargo insurance is a must-have for independent truckers who transport goods. It protects their cargo during transport and covers costs in case of theft or damage.

If a truck is broken into, the cargo insurance policy would cover the costs of the damage. This is especially important for independent truckers who may not have access to traditional corporate protection.

Causes of loss forms are used to define the causes of loss or perils covered by an insurance policy. They can be combined with other forms to make up a commercial property policy.

There are three types of causes of loss forms: Basic Causes, Broad Causes, and Special Causes.

Basic Causes cover the least amount of causes, including fire, lightning, explosion, and vandalism.

Broad Causes include everything covered in Basic Causes, as well as weight of snow, ice, or sleet, and water damage from appliances.

Special Causes cover everything except causes specifically excluded, which are usually related to ordinance or law insurance, earthquakes, and floods.

Here's a breakdown of the three types of causes of loss forms:

Director and Officer liability insurance is a type of protection that covers leadership team decisions. It's payable to directors and officers, or to the company itself, as indemnification for losses or advancement of defense costs.

Leading a business comes with challenges, and director and officer liability insurance provides an additional layer of protection. This type of insurance is a must-have for businesses that want to safeguard their leadership team.

It's essential to evaluate and understand what a particular D&O insurance policy specifically covers. Coverage for past, present, and future directors should be included, as well as defense against claims seeking non-monetary remedies.

Wrongful termination, illegal discrimination, and failure to procure insurance are also crucial aspects to consider when selecting a D&O insurance policy.