About 625,000 new businesses open their doors each year. Unfortunately, about 600,000 close each year.
Why? Lack of experience, the wrong location, and unexpected growth that can catch an owner off-guard are among the reasons many new businesses shut down.
We’ve also found that many small and medium-sized businesses overlook essential insurance policies. In fact, estimates are that fewer than three in 10 business owners have even a basic business owner’s policy, which includes general liability and commercial property coverage. That lack of insurance can spell disaster when a business finds itself suddenly facing a claim.
Here then are the insurance basics for businesses, whether new or old and regardless of which industry they’re in.
General Liability Insurance
General Liability covers a wide range of possible damages and legal expenses related to claims for bodily injury, property damage or other liability.
For example, a customer slips and falls in your store and makes a claim against your business for the costs of their medical treatment. General Liability Insurance can help cover the costs of the claim.
Also, say the operations at your facility cause a fire that spreads to a neighboring company’s office, burning it down. Liability insurance would cover the damages your business is responsible for paying to the neighbor.
General Liability also covers non-physical injuries such as libel, slander, copyright infringement, or false advertising. Assume your product has a defect that you were not aware of, and the product malfunctions, injuring a customer. General Liability would cover that.
When it comes to insurance basics, every company should have some property insurance in place, even if only to cover office equipment in case of theft, fire or other damage.
A company that leases its space could get away with less property insurance. But if you’re a manufacturer with lots of expensive equipment, Property Insurance is an absolute must-have.
Examples of situations property insurance would cover include:
When you’re considering Property Insurance, you’ll have to decide between buying a policy that offers Replacement Cost coverage vs. Actual Cash Value coverage.
An RC policy means the insurance company pays the cost to replace the property in the event of a loss. With ACV coverage, the insurance carrier will pay you less because it will take into account how much the equipment might have depreciated.
ACV coverage costs less than RC coverage, but it also pays less in the event of a claim.
Required in most states, workers’ compensation provides medical coverage and wage replacement for employees who become injured or sick because of job-related activities.
Imagine your employee falls off a ladder while at work and is seriously injured. The employee cannot return to work, so workers’ compensation insurance would pay for the cost of the employee’s medical bills and rehabilitation. It will also pay for a portion of the employee’s lost wages while recuperating.
If you employ even just one person, you’ll want this coverage in place. It protects your business as well, because employees who receive workers’ compensation benefits have limited rights to sue.
Commercial Auto Insurance
Insurance basics also calls for Commercial Auto Insurance, which covers vehicles owned or leased by your business and used primarily for business purposes. It can cover both damage or theft of the vehicles, and liability for automobile crashes caused by employees of your business.
For example, imagine your employee crashes a company car while driving to meet a client, injuring the other driver. Commercial Auto Insurance would cover damages awarded against your company for the crash such as the other driver’s lost wages and medical expenses.
Professional Liability Insurance
Professional Liability Insurance helps cover the costs of claims that your business might incur in committing errors in delivering whatever products or services you provide.
Lawyers, architects, investment brokers and advisers, technology consultants, and medical professionals all need this coverage, which is also known as Errors and Omissions Insurance.
Examples of situations Professional Liability Insurance would cover include:
Professional Liability is typically offered on a claims-made basis, which means the claim will only be covered if both the incident and the claim happen while the policy is in force.
What Else Should You Consider?
The above is a short list of the insurance basics needed for your business, but it’s not an exhaustive list. You will more than likely need Cyber Insurance and may want to consider Umbrella Liability Insurance, Business Income, Directors and Officers Liability, Crime and Pollution Liability.
To help you sort out which coverage is best for your business, CCIG can perform a free, no-obligation risk analysis of your business. Just click on the Contact Us button below to get started.
Michael Ferentinos is a CCIG Insurance Advisor. Reach him at Michael.Ferentinos@thinkccig.com or 720-212-2043.
CCIG is a Denver-area insurance brokerage with personal and business insurance clients nationwide. We do more than make sure you have the right policy. We also help you lower your long-term cost of insurance with our risk and claims management expertise and a commitment to service excellence.
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