Running a business is inherently risky.
Business insurance can help mitigate some of the risks and give you peace of mind. It provides the assurance that if things go wrong, your company will be protected financially.
Continue reading to find out what business insurance is and how it can protect you from unforeseen disruptions, claims, or losses.
What is Business Insurance?
Business insurance is an umbrella term for a variety of insurance policies that protect companies from financial losses caused by unexpected business occurrences. Business insurance helps safeguard your company from:
- property damage
- loss of income
- employee illness and injuries
When you file a business insurance claim, the insurer assists you in recovering the damages within the parameters of your plan. Without insurance, your company will be required to cover these expenses, which could be quite costly.
There are different types of business insurance that protect the company you have worked to build, including the following:
- commercial property
- commercial liability
- workers’ compensation
- commercial auto
The types of insurance products your business needs depend on various factors, including business revenues, size, and industry type. It is important to have adequate protection in the event of lawsuits, accidents, and natural disasters that may have a major impact on your business.
What does business insurance cover?
Business insurance is a term used to describe various commercial insurance plans that protect business against natural calamities, third-party liability claims, cyber security attacks, and more.
Here are the most common types of business insurance:
- commercial property insurance
- general liability insurance
- product liability insurance
- professional liability insurance
- cyber liability insurance
- commercial auto insurance
- directors and officers insurance
Types of Business Insurance
You can buy different types of business insurance to adequately protect it from financial losses resulting from a crisis or accident. Let's go into each type of insurance in more detail.
General liability insurance: Protects your business from financial losses due to property damage, bodily injury, personal injury, and advertising injury.
Product liability insurance: Protects your company from claims that a product you manufactured sold, or distributed caused property damage or bodily injury to someone. The purpose of product liability insurance is to protect your business by making sure you do not have to pay compensatory damages or legal fees.
Professional liability insurance: Also referred to as errors and omissions insurance (E&O), professional liability insurance protects your business from claims arising from negligence, errors, or malpractice.
Commercial property insurance: Protects the physical assets of your business, including buildings, equipment, inventory, and electronics, as well as exterior fixtures (landscaping, fencing, outdoor signs, etc.) against damage or loss from a wide range of causes. A hurricane, water damage, fire, earthquake, and ice storm are just some of the events that commercial property insurance can cover.
Commercial auto insurance: Protects you when a business-owned vehicle is vandalized, stolen, involved in a collision, or otherwise damaged. For example, if any employee is injured in an auto accident involving your business vehicle, the coverage can help pay for lost wages and medical expenses. Commercial auto insurance usually also provides replacement car coverage to make it easier for you to rent a car after an auto accident.
Cyber liability insurance: Also known as cyber risk insurance or cybersecurity insurance, cyber liability insurance protects your business from cyber threats and breaches. The coverage pays for things like data recovery (the cost of recovering data after a cyber breach), identity recovery (the cost of services needed to restore identity records), investigation services (the cost of getting the breach or theft thoroughly investigated), and damages sustained by your businesses partners and customers due to the cyberattack (including legal fees, settlement costs, and customer notifications).
Directors and officers Insurance: This type of business insurance protects your directors and officers from claims arising from decisions and actions taken by them.
What does business insurance not cover?
Business insurance is not designed to replace personal insurance.
It will not reimburse your employees' medical costs should they get a major illness, nor would it provide your family with a monetary reward in the case of your passing.
Other insurance products, such as life insurance, health insurance, disability insurance, critical illness insurance, and others, are designed to protect you in these situations. Additionally, contractual liability, intentional wrongdoing, cost estimations, and cost assurances are not covered by company insurance.
How much does business insurance cost?
The amount you pay for business insurance depends on many factors, such as:
- the types of business insurance and the total amount of coverage you need
- the size and location of your business
- the total number of employees
- industry type
- annual gross revenue
Who needs business insurance?
Almost every business, regardless of its size, industry, or location, needs some form of business insurance.
Without it, business owners may have to pay for costly damages and lawsuits against their business out-of-pocket, which could destroy them financially.
Is insurance mandatory for business owners?
No, it is not. We highly recommend you buy this type of coverage if you own a business. Otherwise, unanticipated occurrences like natural disasters, damage caused to someone else’s property, or a lawsuit arising from professional negligence can place a huge financial burden on your business and ruin your peace of mind.
How much business insurance you should get largely depends on location, industry, revenues, size, and the total number of employees. There is no one-size-fits-all answer as each business is unique.
For example, if you own a nightclub, you probably would need comprehensive professional liability insurance and commercial property insurance but might be able to do without cyber liability insurance. In contrast, cybersecurity insurance is a must-have for a business that stores the credit card data of its customers, for example an online food ordering and delivery platform.
Here are some tips to help you figure out how much business insurance you need:
- Assess your risks: The first step is to determine what kind of natural events, lawsuits, or accidents could result in a loss of income for your business. For example, if your business is located in an area prone to ice storms, commercial property insurance could provide adequate protection against loss.
- Shop around: Insurance rates may vary greatly from one provider to another. If you do not want to pay more than you have to, compare quotes of different insurance companies.
- Reassess the insurance needs regularly: As your company grows, its liabilities will also likely increase. Reassess your business’s insurance needs every two years to ensure your existing coverage is sufficient for your present needs.
Does business insurance cover personal property?
Business insurance provides financial protection if any tangible assets belonging to your business are damaged, stolen, or lost. It covers things like the building from which you run your business, furniture, inventories, and computers. Business insurance, however, is not designed to replace home insurance, which covers your private residence.
Business insurance is an umbrella term that covers various types of commercial insurance.
Regardless of your business’s location, size, or annual turnover, you likely need some form of business insurance. The right coverage can provide comfort in the knowledge that your business is adequately protected from losses due to unforeseen events.
Dundas Life's insurance advisors can help you determine how much business insurance you need and help you find the right coverage at the lowest-possible price.