Business insurance is a broad description that can be broken down into a list of nine types of insurance policies and here I will briefly explain the coverage and expand on these as individual topics. For now, these are general descriptions so that we are talking about the same thing when I use these terms in later articles.
insures against loss or damage
to the location of the business and its contents. It can also insure the property of others in your control when the loss occurs. Property insurance can be for a specific risk. For example, a fire insurance policy insures only against a fire loss to the location. A tornado is not a fire and, therefore, that loss would not be covered. The insured location
can be owned, leased or rented.
insures against liability legally imposed upon your business because of the negligence of the business or its employees. Put another way, it protects your business
when the business is sued for negligence.
Your personal automobile policy does NOT cover vehicles used by your business. If your business uses vehicles or anything that is required to be titled by your state, then you need a commercial auto policy
. Commercial auto coverage
insures against property damage to vehicles and damage caused to others by those vehicles.
You will need to insure your employees against on-the-job injuries. Every state is different. But, most states have put into place some form of workers' compensation system. Workers' compensation
is a system where the employee is not allowed, by statute, to sue their employer for on-the-job injuries; but, in return, the employer must participate in a system that provides nearly automatic payment to the employee in case of injury for medical bills and damages. There are many options for workers' compensation coverage
. Some states allow an employer to opt-out of the system if the employer is self insured, some run the system through private insurers
while others use state agencies.
Business interruption insurance
insures against loss or damage to the cash flow and profit of a business caused by the business being unable to operate because of interruption. The easiest example is to think about a critical piece of machinery being struck by lightning. The repairs to the machine may be covered by other coverage such as property or casualty insurance. But, if you can not make widgets for three months, than there is no replacement of that income without this coverage.
Life and disability insurance
protects the business against the death or disability of key employees
. For example, one partner carries a life insurance policy
naming the partnership as a beneficiary. If that partner dies, and the business has planned properly, the proceeds of the policy can be used by the business to buy out the share of the decedent's partnership interest from the estate.
It could very well be that your business is so unique to have need for coverage
that is a mixture of some of the coverage listed above or something written specifically for your particular risk. One can think of some actresses, actors, or sports stars that have had legs insured at some point in there careers. This would be an example of a scripted policy.