August 8, 2022
What is Business Insurance
Business Insurance, What is It?
Who Needs Business Insurance?
What types of Business Insurance are there?
A simple list of types/kinds of business insurance policies for small to mid sized businesses. Small business insurance explained.
Business Insurance Defined:
Investopedia defines Business Insurance simply as: “coverage [that] protects businesses from losses due to events that may occur during the normal course of business.” They note that “There are many types of insurance…including coverage for property damage, legal liability and employee-related risks.” While this definition is true, it is severly lacking. Source.
What is a Business?
Let us take a step back and define a business. Merriam Webster defines Business, with one its ten different definitions as “usually commercial or mercantile activity engaged in as a means of livelihood” similar to “trade”. There are two different parts to this that are important: 1. An Activity, usually “commercial or mercantile” and 2. “a means of a livelihood.”
Consumers and Business Owners should be aware that different insurers are going to define a business differently. Your homeowners policy is likely to define a business different than your general liablity insurer. And neither of them are likely going to have the same definition as Webster.
How Home Insurers Look at a Business:
Home insurers typically do not cover any exposure for your business, regardless of if it is conducted out of your house. Don’t believe me, read your policy. It is imperative to understand that if you own a business you probably need business insurance on it.
A Simple View on Business Insurance Needs:
Do you do something for a living? Do you own that mechanism? Have you incorporated either as a partnership, LLC, or Corporation? Are you self employed? Do Provide Professional Advice, Build, Make, Ship things? If you answered yes to any of these – believe it or not – you may need some business insurance. If you work for a Corporation and are fully covered by their insurance policy, than you may already be set, but if you are not covered by some other entities policy – you should seek more information. Even if you just set up a side business, outside of your regular gig – you should speak with your insurance agent.
How to Get Business Insurance:
Simple, call an insurance agent. Yes you can probably purchase a simple policy online without speaking with an individual – but without speaking with an agent, you may miss several key considerations. Just pick up the phone and speak with a small business insurance agent now.
Type of Business Insurance:
Business insurance is a lot more complicated than personal lines insurance such as homeowners. There are numerous types and kinds. The most basic is called a GL policy.
General Liablity [GL] – General Liablity is often the very first insurance policy purchased. General liablity is much as it sounds, it is libabiliy that is general in nature. GL policies are often wrapped up within the Business Owners Policy or BOP for short.
Business Owners Policy [BOP]– BOPS are typically only available for smaller businesses that engage in easy to explain activities. A baker might be able to secure a BOP but a mutlistate trucking firm might not. BOPs often, but not always, might contain general liablity, business property, and even some business interuption.
Professional Liability [PL] – PL policies can go hand in hand with GL policies as its often difficult to discern which may pay for a given claim. PL goes by other names such as E&O or Malpractice insurance. Professional Liablity is often the type of insurance most difficult to explain to individuals but is most often neeeded.
Empoloyers Practice Liablity [EPLI] – EPLI insurance is potential protection for your hiring [and firing] practices. Did you not hire someone because of the color of their skin, or body proportion? Or at least does someone think so?
Cyber – Cyber insurance is a newer form of insurance that can provide many online insurance coverages. Cyber proteciton is not necesarily there for just online businesses. Nowadays due to almost all business being online at least to some extent, Cyber is becoming more and more necesary.
Workers Comp – Workers comp is a form of no fault medical insurance for your employees. Workers Comp is usually mandated at the state level. If you are an employer and have employess, you need Workers Compensation insurance. There are two major challenges with workers comp insurance in the US. 1. Workers comp is pretty pricey, at least in our opinion. And 2. Workers compy is laiden with bogus insurance claims. Obviously these two points work in tandem.
Commercial Auto – If you drive your vehicle for business, you probably need a business auto policy. Is your auto owned by your corporation, you too probably need a business auto policy. We frequently speak with clients that believe their auto does not need business coverage when in fact they do. If you do not believe this agency – go read your personal auto insurance policy.
Commercial Property Insurance – the name explains it best. It is coverage for a commercial property.
Commercial Umbrella Insurance – Commercial Umbrellas can sit over various underlying liablity policies. Commercial umbrellas are different than personal umbrella insurance.
Directors and Officers Insurance [D&O] – D&O insurance is typically for the folks managing the business. As the name would imply the Directors and Board members, management. You may not have anything to do with a D&O claim -but another party could claim that you should have done something. D&O is a very necesary coverage for management.
Business Life Insurance – Yes there are life insurance policies for individuals in business. This can get pretty complicated but lets just say that some businesses really depend on certain individuals for their well being.
Are those all the types of business insurance? No – not a chance. There are dozens, perhaps hundreds more, but these are probably the most common types of business insurance for smaller to mid size companies. A few coverages such as Business Interuption coverage, we mentioned but intentionally did not go into. Other forms of insurance, such as Media Insurance are rather specialized.
Exclusions and Sublimits Apply, Read your Terms and Conditions:
Please don’t read this simple insurance post and think – Hey I dont need that – Or I will be covered. Please speak with your own licensed insurance broker or agent whenever making decisions to purchase or change insurance. All policies have terms, conditions, and exclusions – read them – read them all as they are important.
