Business insurance coverage protects businesses 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. Companies evaluate their insurance needs based on potential risks, which can vary depending on the type of environment in which the company operates.
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BREAKING DOWN ‘Business Insurance’
It is especially important for small business owners to carefully consider and evaluate their business insurance needs because they may have more personal financial exposure in the event of loss. If a business owner does not feel he or she has the ability to effectively assess business risk and the need for coverage, they should work with a reputable, experienced and licensed insurance broker. You can obtain a list of licensed agents in your state through your state’s department of insurance or the National Association of Insurance Commissioners.
Several types of business insurance that small business owners might consider:
Professional Liability Insurance
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.
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
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.
1. General Liability Insurance: 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.
2. Property Insurance: If you own your building or have business personal property, including office equipment, computers, inventory or tools you should consider purchasing a policy that will protect you if you have a fire, vandalism, theft, smoke damage etc. You may also want to consider business interruption/loss of earning insurance as part of the policy to protect your earnings if the business is unable to operate.
3. Business owner’s policy (BOP): A business owner policy packages all required coverage a business owner would need. Often, BOP’s will include business interruption insurance, property insurance, vehicle coverage, liability insurance, and crime insurance . Based on your company’s specific needs, you can alter what is included in a BOP. Typically, a business owner will save money by choosing a BOP because the bundle of services often costs less than the total cost of all the individual coverage’s.
4. Commercial Auto Insurance: Commercial auto insurance protects a company’s vehicles. You can protect vehicles that carry employees, products or equipment. With commercial auto insurance you can insure your work cars, SUVs, vans and trucks from damage and collisions. If you do not have company vehicles, but employees drive their own cars on company business you should have non-owned auto liability to protect the company in case the employee does not have insurance or has inadequate coverage. Many times the non-owned can be added to the BOP policy.
5. Worker’s Compensation: Worker’s compensation provides insurance to employees who are injured on the job. This type of insurance provides wage replacement and medical benefits to those who are injured while working. In exchange for these benefits, the employee gives up his rights to sue his employer for the incident. As a business owner, it is very important to have worker’s compensation insurance because it protects yourself and your company from legal complications. State laws will vary, but all require you to have workers compensation if you have W2 employees. Penalties for non-compliance can be very stiff.
6. Professional Liability Insurance: this type of insurance is also known as Errors and Omissions Insurance. The policy provides defense and damages for failure to or improperly rendering professional services. Your general liability policy does not provide this protection, so it is important to understand the difference. Professional liability insurance is applicable for any professional firm including lawyers, accountants, consultants, notaries, real estate agents, insurance agents, hair salons and technology providers to name a few..
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7. Directors and Officers Insurance: this type of insurance protects the directors and officers of a company against their actions that affect the profitability or operations of the company. If a director or officer of your company, as a direct result of their actions on the job, finds him or herself in a legal situation, this type of insurance can cover costs or damages lost as a result of a lawsuit.
8. Data Breach: If the business stores sensitive or non-public information about employees or clients on their computers, servers or in paper files they are responsible for protecting that information. If a breach occurs either electronically or from a paper file a Data Breach policy will provide protection against the loss.
9. Homeowner’s Insurance: Homeowner’s insurance is one of the most important kinds of insurance you need. This type of insurance can protect against damage to the home and against damage to items inside the home. Additionally, this type of insurance may protect you from accidents that happen at home or may have occurred due to actions of your own.
10. Renter’s Insurance: Renter’s insurance is a sub-set of homeowner’s insurance which applies only to those whose who rent their home. The coverage is protects against damage to the physical property, contents of the property, and personal injury within the home.
11. Life Insurance: Life insurance protects an individual against death. If you have life insurance, the insurer pays a certain amount of money to a beneficiary upon your death. You pay a premium in exchange for the payment of benefits to the beneficiary. This type of insurance is very important because it allows for peace of mind. Having life insurance allows you to know that your loved ones will not be burdened financially upon your death.
12. Personal Automobile Insurance: Another very important type of insurance is auto insurance. Automobile insurance covers all road vehicles (trucks, cars, motorcycles, etc.). Auto insurance has a dual function, protecting against both physical damage and bodily injury resulting from a crash, and also any liability that might rise from the collision.
13. 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 homeowner’s or auto insurance. Generally, it is sold in increments of $1 million and is used only when liability on other policies has been exhausted.
Her stomach dropped when the application was denied. “I was shocked since I always paid on time and in full,” she said in an email. “But then, I learned that there was incorrect information on my report.”
One of Lintz’s credit reports said she worked in a pizza shop. She’d never so much as tossed pizza dough or delivered a calzone. There was also a lien that didn’t belong to her and an incorrect home address.
Lintz had worked hard to build up a good credit score. She was surprised to learn that clerical and reporting errors had lowered her score enough that she was denied for a card she otherwise probably would have been approved for.
Reporting errors are just one of the dangers your strong credit score faces. Fraudsters, data breaches and unauthorized account creation and access can all take a toll on your credit score if they aren’t caught early and addressed.
You’ve worked to build your good score and it takes some attention to maintain. The good news is that maintaining your good score can be pretty straightforward. With a little diligence, some free time and easy-to-use tools, you can avoid that sinking feeling that comes with an unexpected denial.
What’s in Your Score
Your FICO credit scores, coming from three credit bureaus, range from 300-850 and can affect how much money a lender will lend you and at what terms (like interest rates). A higher score can mean a lower rate—which can save you money. And, some employers will check your score and report before making a job offer.
How Can I Help Protect My Score?
Joe Whitchurch, head of CreditWise® from Capital One, recommends a three-step process to help protect your good score. “There are some simple steps you can take to help protect the credit score you’ve worked so hard to build.”
Step One – Monitor your credit report and keep track of your score.
“One thing I always recommend is downloading a free credit monitoring tool like CreditWise,” Whitchurch said.
CreditWise is free, even if you’re not a Capital One customer. “With CreditWise, you’ll receive alerts when something meaningful changes on your TransUnion credit report. You’ll get notifications for things like recent inquiries, delinquent accounts and other changes that might impact your score.”
Step Two – Understand what goes into your score
Three main bureaus—Experian®, Transunion® and Equifax®—collect and compile credit-related data, payment information and calculate your credit scores. Various credit factors are considered, and some are given more weight than others depending on the model used:
Your history of on-time payments
The amount of money you owe
The length of your credit history
The number of recently opened accounts and inquiries to your credit report
The types of credit you use
Step Three – Keep Doing What You’re Doing
You’ve already mastered the basics by building up your good score. Help protect it by doing more of the same. FICO recommends keeping your balances low, paying your bills on time, paying off debt rather than moving it around and limiting new accounts to keep your score high.
“Maintaining your credit doesn’t have to be complicated,” Whitchurch said. “Taking simple steps like monitoring your financial accounts regularly, reviewing your credit report for signs of theft or error, using strong passwords and only sharing your information with trusted sources can go a long way in helping to protect your credit and giving you some peace of mind.”
Janice Lintz isn’t likely to get surprised by her credit report again. She diligently followed up on the errors that surprised her and knows her score is back where it belongs. “My credit score skyrocketed when I removed all the errors and cleaned it up. Now my score is back in the high 700’s to 800.” Follow these three steps and you’ll be well on your way to maintaining your good scores, too.
This article is for educational purposes only, and is not intended to provide medical or legal advice, or to indicate the availability or suitability of any product or service for your unique circumstances.
Capital One does not provide, endorse, or guarantee any third-party product, service, information or recommendation listed above. The third parties listed are solely responsible for their products and services, and all trademarks listed are the property of their respective owners.
From the day an entrepreneur starts a business, he exposes himself to certain risks. Even before the first employee is hired, a business is at risk, making it important to have the right insurance in place. One lawsuit or catastrophic event could be enough to wipe out a small business before it even has a chance to get off the ground.
Fortunately, businesses have access to a wide range of insurance types to protect them against these dangers. Here are some insurance types that a business must have in place as soon as possible.
1. 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. There is no one-size-fits-all policy for professional liability insurance. Each industry has its own set of concerns that will be addressed in a customized policy written for a business.
Related: Do I Need Liability Insurance?
2. Property insurance.
Whether a business owns or leases its space, property insurance is a must. This insurance covers equipment, signage, inventory and furniture in the event of a fire, storm or theft. However, mass-destruction events like floods and earthquakes are generally not covered under standard property insurance policies. If your area is prone to these issues, check with your insurer to price a separate policy.
3. Workers’ compensation insurance.
Once the first employee has been hired, workers’ compensation insurance should be added to a business’s insurance policy. This will cover medical treatment, disability and death benefits in the event an employee is injured or dies as a result of his work with that business. Even if employees are performing seemingly low-risk work, slip-and-fall injuries or medical conditions such as carpal tunnel syndrome could result in a pricey claim.
Related: Does Your Home Business Need Insurance?
4. 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.
5. Product liability insurance.
If your business manufactures products for sale on the general market, product liability insurance is a must. Even a business that takes every measure possible to make sure its products are safe can find itself named in a lawsuit due to damages caused by one of its products. Product liability insurance works to protect a business in such a case, with coverage available to be tailored specifically to a specific type of product.
6. Vehicle insurance.
If company vehicles will be used, those vehicles should be fully insured to protect businesses against liability if an accident should occur. At the very least, businesses should insure against third-party injury, but comprehensive insurance will cover that 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 to this is if they are delivering goods or services for a fee. This includes delivery personnel.
7. 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.
By having the right insurance in place, a business can avoid a major financial loss due to a lawsuit or catastrophic event. Check with your insurer to find out what forms of insurance are advised for your type of business and put those plans in place as soon as possible.