Business Insurance

Business Insurance Policy
Entrepreneurs starting businesses often go all in. They cash out savings, charge up credit cards and take out loans. They sink it all into the company, betting they have the business smarts to build a successful business. Of course, theyre also betting that fate will cooperate. Flood, fire, wind; lawsuits, injuries, death — catastrophes wipe out business assets. Against this risk, businesses purchase insurance.

Paranoid business owners are in luck: Business insurance exists for any risk an owner can imagine. The range of offerings means that the cost of policies and the damage each insures against differs. Businesses must confer with insurance agents to determine the right combination of cost and coverage type.

Business insurance types include general, product, and professional liability insurance; commercial property insurance and home-based business insurance. General liability insurance covers the expense of legal problems, paying settlements, judgments and the cost of defending lawsuits, for instance.

Product liability insurance absorbs financial responsibility if a product harms someone. For companies providing services, professional liability insurance covers the cost of malpractice, errors and negligence.

Commercial property insurance covers the loss or damage of business property. Property not only includes tangible things such as equipment, but also income loss and business interruption. Typically, businesses purchase all-risk property insurance. It protects against a wide variety of dangers such as wind, flood and vandalism, unless the policy specifically excludes a peril. Businesses more likely to fall victim to specific problems may purchase peril-specific policies, which insure against a specific danger named in the policy. Home-based businesses may buy insurance to cover liabilities that homeowners policies may not cover.

State law decides which businesses must carry insurance and what kind it must be. Certain activities — for instance, using a business vehicle — may trigger an insurance requirement. States typically dont require it, though, unless the company employs workers. Then the business must carry workers’ compensation, unemployment and, in some areas, disability insurance.

As a condition of participation, banks and investors might also require insurance. They may ask partners to purchase life insurance, for instance, or insure against certain disasters.