In addition to insurance related to employee healthcare, life and worker-related coverage required by state and federal regulations (e.g., worker’s compensation, unemployment, FICA) there are many different types of liability insurance coverage a business should consider to reduce the risk of an unintended event having an overwhelmingly negative impact on its operation. However, there are ways to cover just about anything, some of which may be unnecessary in your specific situation. That’s why it’s important for any business to establish a relationship with a trusted insurance agent or broker who can advise you on the specific needs of your business and the exact types of insurance coverage you should obtain. In general, however, here are list from the Small Business Administration of types of liability insurance that can provide a partial checklist for your review with an agent or broker.
General Liability Insurance
Business owners purchase general liability insurance to cover legal hassles due to accident, injuries and claims of negligence. These policies protect against payments as the result of bodily injury, property damage, medical expenses, libel, slander, the cost of defending lawsuits, and settlement bonds or judgments required during an appeal procedure.
Product Liability Insurance
Companies that manufacture, wholesale, distribute, and retail a product may be liable for its safety. Product liability insurance protects against financial loss as a result of a defect product that causes injury or bodily harm. The amount of insurance you should purchase depends on the products you sell or manufacture. A clothing store would have far less risk than a small appliance store, for example.
Professional Liability Insurance
Business owners providing services should consider having professional liability insurance (also known as errors and omissions insurance). This type of liability coverage protects your business against malpractice, errors, and negligence in provision of services to your customers. Depending on your profession, you may be required by your state government to carry such a policy. For example, physicians are required to purchase malpractice insurance as a condition of practicing in certain states.
Commercial Property Insurance
Property insurance covers everything related to the loss and damage of company property due to a wide-variety of events such as fire, smoke, wind and hail storms, civil disobedience and vandalism. The definition of “property” is broad, and includes lost income, business interruption, buildings, computers, company papers and money.
Property insurance policies come in two basic forms:
- All-risk policies covering a wide-range of incidents and perils except those noted in the policy
- Peril-specific policies that cover losses from only those perils listed in the policy. Examples of peril-specific policies include fire, flood, crime and business interruption insurance. All-risk policies generally cover risks faced by the average small business, while peril-specific policies are usually purchased when there is high risk of peril in a certain area. Consult your insurance agent or broker about the type of business property insurance best suited for your small business.
Home-Based Business Insurance
Homeowners’ insurance policies do not generally cover home-based business losses. Depending on risks to your business, you may add riders to your homeowners’ policy to cover normal business risks such as property damage. However, homeowners’ policies only go so far in covering home-based businesses. You will probably need to purchase additional policies to cover other risks, such as general and professional liability. Again, it’s important to consult a trusted insurance agent or broker.