Every business owner exposes themselves to risk. One lawsuit or catastrophic event could wipe out a business, and if the business entity is not structured properly, wipe out a business owners person wealth as well. Fortunately, businesses have access to a wide range of insurance types to
protect them and their owners. Here are some insurance types that your business may want to have in place before a business ending event hits.
- Business owner’s policy (BOP).
Some insurers offer business owner policy packages with all the required coverage a business owner would need, to include the many categories that follow. Often, BOP’s will include business interruption insurance, property insurance, vehicle coverage, liability insurance, and
crime insurance. You may be able to package your insurance to match your company’s specific needs and save money by choosing a BOP that bundles services. - General Liability Insurance.
Every business, even if home-based, should consider general liability insurance. These policies provide both defense against, and coverage for, alleged damages by you, your employees, or your products or services which result in bodily injury or property damage to a third party. - Professional liability insurance.
Professional liability insurance, also known as errors and omissions (E&O) insurance, covers a business against negligence claims due to harm that results from mistakes or failure to perform. Policies provide defense and damages for failure to or improperly rendering professional
services. There is no one-size-fits-all policy for professional liability insurance, as each industry has its own set of concerns. Your general liability policy likely does not provide this protection, so it is important to understand the difference. - Directors and Officers/Management Liability Insurance.
Directors and Officers (D&O) insurance protects the directors and officers of a company against their actions that affect the profitability or operations of the company. It is typically as indemnification for losses for a legal action brought which alleges wrongful acts in their capacity as directors and officers. Coverage can extend to defense costs arising out of criminal and regulatory investigations/trials and can cover costs of defense or damages lost as a result of a lawsuit. Intentional illegal acts, however, are typically not covered under D&O policies. D&O insurance has become closely associated with broader management liability insurance, which covers liabilities of the corporation itself as well as the personal liabilities for the directors and officers of the corporation. - Property Insurance.
If you own your building, lease space, or have business personal property, (including office equipment, computers, inventory, or tools) you should consider purchasing a policy that will protect your property against fire, vandalism, theft, storm, or smoke damage. Note that mass-destruction events like floods and earthquakes are generally not covered under standard property insurance policies. If your area is prone to these issues, you may need a separate policy. - Home-based businesses.
Many professionals begin their small businesses in their own homes. Unfortunately, homeowner’s policies don’t cover home-based businesses in the way commercial property insurance does. If you’re operating your business out of your home, ask your insurer for additional insurance to cover your equipment and inventory in the event of a problem. - Renter’s Insurance.
Renter’s insurance is a sub-set of homeowner’s insurance; it applies only to those who rent their home. The coverage protects against damage to the physical property, contents of the property, and personal injury within the home. - Product liability insurance.
If your business manufactures products for sale on the general market, product liability insurance is a must. Even when you take every measure possible to make sure your business products are safe, you can find yourself named in a lawsuit. Product liability insurance can tailor coverage to your specific type of product. - Commercial Auto Insurance.
Commercial auto insurance protects a company’s vehicles, and your employees, products or equipment in these vehicles. If you do not have company designed vehicles, and employees drive their own cars on company business, you should consider non-owned auto liability to protect the company in case the employee does not have adequate auto insurance. - Worker’s Compensation.
Worker’s compensation provides insurance to employees who are injured on the job. It provides wage replacement; disability and death benefits; and medical benefits in the event an employee is injured or dies while working. In exchange for these benefits, the employee gives up his right to sue his employer for the incident. As a business owner, you can appreciate the importance to have worker’s compensation insurance as it can protect your company from legal complications. Even if employees are performing seemingly low-risk work, slip-and-fall injuries or medical
conditions such as carpal tunnel syndrome could result in expensive claims. State laws vary, but all require you to have worker’s compensation if you have W2 employees. Penalties for non- compliance can be very stiff. - Data Breach.
As most businesses conduct on-line commerce, the importance of data breach insurance has increased. If your business stores sensitive or non-public information about employees or clients on their computers, servers, or in paper files, you are responsible for protecting that information. If a breach occurs either electronically or from a paper file, a Data Breach policy can provide protection against the loss.
- Business interruption insurance.
If a disaster or catastrophic event does occur, a business’s operations will likely be interrupted. During this time, your business will suffer from lost income due to your staff’s inability to work in the office, manufacture products, or make sales calls. 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 these events. - Personal Umbrella Insurance.
You may want some additional coverage on top of insurance policies you already have. This is where personal umbrella insurance comes into play. This type of insurance is an extension to an already existing insurance policy and covers beyond the regular policy. This insurance can cover different kinds of claims, including those made against both homeowner’s and auto insurance. Generally, it is sold in increments of $1 million and is used only when liability on other policies has been exhausted.
Having the right insurance in place can prevent a major financial loss due to a lawsuit or catastrophic event. Not sure if you have what you need? Check with your insurer or let us put you in touch with our network to find out what forms of insurance are advised for your type of
business. Contact CASHMAN LAW today for a free consultation to see how we might assist.
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CASHMAN LAW LC (California) to consult with an attorney for advice on specific legal issues.