It is especially important for small business owners to carefully consider and evaluate their business insurance needs because they may have more financial exposure in the event of a liability or loss. According to the business entity type incorporated and the limited liability protection it offers, business insurance is a wise decision to protect from losses due to events that may occur during the normal course of business. There are many types of insurance for businesses including coverage for property damage, legal liability and employee-related risks. In some cases, specific insurance such as a general liability insurance or professional liability insurance is required to apply for a Federal License. Landlords will always require General Liability Insurance to rent an office or space.
Several types of business insurance that small business owners might consider:
- Professional liability insurance insures against negligence claims that result from mistakes or failure to perform. There is no one-size-fits-all professional liability coverage. Each industry has its own unique concerns that should be addressed.
- Property insurance covers equipment, signage, inventory and furniture in the event of a fire, storm or theft. However, it doesn’t cover mass-destruction events like floods and earthquakes. If your area is at risk for these issues, you’ll need a separate policy.
- Homeowner’s policies don’t cover home-based businesses like commercial property insurance covers businesses. If you’re operating a home-based business, inquire about additional coverage for equipment and inventory.
- Product Liability Insurance. If your business manufactures products to sell, product liability insurance is very important. Any business can find itself named in a lawsuit due to damages caused by its products. Product liability insurance protects a business in such cases.
- Vehicle insurance. Any vehicles used for business should be fully insured. At the very least, businesses should insure against third-party injury, but comprehensive insurance will cover the vehicle in an accident, as well. If employees are using their own cars for business, their own personal insurance will cover them in the event of an accident. One major exception is if a person is delivering goods or services for a fee, including delivery personnel.
- Business interruption insurance / Loss of profit. This type of insurance is especially applicable to companies that require a physical location to do business, such as retail stores. Business interruption insurance compensates a business for its lost income during events that cause a disruption to the normal course of business.
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What kind of Insurance a small business need?
Normally, General Liability Insurance GLL: Every business, even if home-based, needs to have liability insurance. The policy provides both defense and damages if you, your employees or your products or services cause or are alleged to have caused Bodily Injury or Property Damage to a third party.
If renting an office, warehouse or retail space, landlord will require a GLL and have it listed under the policy.
Additional insurance might be required based on your business activities.
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