Business Insurance
Cover Your Bases
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:
- A factory worker gets injured on a production line
- A fire or other disaster destroys company property
- A customer slips and falls in a store
- A product the company makes ends up injuring some customers, and the company gets sued
- Another company claims that it’s stolen ideas or intellectual property
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:
- Workers’ compensation: Replaces lost wages and covers medical treatments for employees injured on the job. This coverage also pays death benefits to the family of an employee who dies at work.
- Unemployment: Provides compensation to eligible individuals who are let go by a company.
- Disability: Pays disabled employees (those with a long-term illness or injury) a portion of their income if they are unable to do their job for an extended period of time.
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
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Research state insurance requirements
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Find an insurance agent to walk through your options
and obtain quotes
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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.
- Customers once filed a class action lawsuit against Subway, claiming that the fast-food chain’s “footlong” sandwiches didn’t always measure up to a full 12 inches.
- For some people, how they look is their business. Jennifer Lopez has reportedly insured her derriere for a whopping $27 million, while Gene Simmons insured his tongue for $1 million.
- Own a food truck? You need special food service vehicle insurance for that to protect your business in cases of personal injury, property damage, or if someone doesn’t stomach your streetside ceviche so well.
- Business insurance helps protect a company if its products or services cause harm or its property is destroyed.
- Various coverage options are available and can be bundled into comprehensive policies.
- Many states require businesses to carry certain types of insurance, like workers’ compensation, disability, and unemployment.
- An insurance agent can help a business compare policy options from different insurance providers to get the right type of coverage.
