A business insurance policy is a contract between an insurance company and a business. In exchange for a premium paid by the business, the insurance company agrees to protect the business against some types of possible financial losses.
Business insurance is like a financial safety net for companies. Depending on the policy and the type of business, it can cover a wide range of potential situations, such as:
Business insurance covers companies big and small, from the home-based sole proprietor to massive multinational corporations. There is no single coverage type that is right for every business. Instead, a business picks a policy based on many factors, including what it makes, where it’s located, whether it has employees, and what services it provides.
Businesses may need to carry certain types of insurance to meet the requirements of leases, business contracts, and state law. States most frequently require:
Insurance companies sell many other types of insurance for businesses. Among the most common are:
|Type||What it covers|
|General liability||Claims against a business related to injury, property damage, libel, and slander; also covers the cost of legal proceedings|
|Product liability||Losses due to a defective product the company made|
|Professional liability (aka errors and omissions)||Harm related to the business’s professional mistakes (like if your accountant botched your taxes and it cost you extra money)|
|Commercial property||Damage to a company’s property, supplies, or equipment caused by things like fire, theft, or vandalism (but typically not natural disasters)|
|Business interruption||Lost business if the company is unable to operate for a covered reason (such as its headquarters burned down)|
|Home-based business||Damage to business equipment; injuries sustained by business partners or clients visiting your home|
Some businesses opt for a business owner’s policy that combines multiple types of business insurance into one package, which often saves money.
There are a few steps to picking the right business insurance:
Figure out your business’s specific risks
and what you need coverage for
Research state insurance requirements
Find an insurance agent to walk through your options
and obtain quotes
Compare available policies,
coverage limitations, and prices
Be sure to reassess your coverage needs and policy every year or two to make sure you’re still appropriately protected. You will also want to review coverage if your business experiences a major change, like the opening of a new location.
Business insurance can help protect a company from financial ruin. There are many coverage types available, and a state might require some certain minimum level of coverage. The right coverage for a business depends on many factors, like whether it has employees and what services it provides.