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INSURANCE

7 Types of Insurance You

Need to Protect Your
Business
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 Image credit: Pixabay

John Boitnott
VIP CONTRIBUTOR
Journalist, Digital Media Consultant and Investor

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December 30, 2014 4 min read

Opinions expressed by Entrepreneur contributors are their own.

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.

Related: Business Interruption Insurance: What It Will -- and Won't --

Cover
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