What Is Business Insurance and How Does It Work?
Business insurance offers financial protection if your small business faces risks that affect operations. It is a risk management tool used to help cater for events including employee injury, injury caused by your products or services, fire events, extreme weather events, and burglary.
You need to contact a licensed insurance broker who’ll assess your business’s risks. This professional will then advise on the insurance company’s policies and the premiums to pay annually.
Whenever an insurable event such as an employee injury happens, the insurance company will help cover the costs. Depending on your agreement, you’ll pay an amount of money to help cover the expenses before the insurance company settles the bill. This is known as a deductible.
An insurance company won’t pay for an event that you aren’t covered for. For example, a commercial property insurance policy will cover the loss of business property but won’t help settle bills when a worker is injured at work. You, therefore, should ensure that you’re sufficiently protected.
To do this, you need to understand the different types of business insurance.
Types Of Business Insurance
Workers’ compensation insurance is necessary when you have employees. This will protect them when they fall ill or get injured on the job.
Professional liability insurance is important if you offer services. Consultants, including doctors, need this to protect themselves against negligence suits and other work-related errors. In medicine, for example, 41% of Americans believe to have experienced medical malpractice at some point. Despite this, only a few people file for medical malpractice suits. Although medical malpractice suits aren’t prevalent, they are costly, sometimes costing as much as $100,000. So, you better get covered, to be safe.
Product liability insurance is very different from professional liability insurance. While the latter covers services, the former covers products. Product liability insurance is, therefore, vital for product-oriented businesses. This covers damages caused by the product. In 2020, 11 million Americans were treated for injuries caused by consumer products. Product liability lawsuits are not limited to particular products. Everything is fair game.
Commercial property insurance protects businesses with a brick-and-mortar location. Inventory, equipment, office space, furniture, and signage, among other items, are protected in case of a burglary. Fire is covered too with this policy, but you should talk to your insurance agent to know the extent to which you’re covered. Usually, there’s the basic, broad, and special form cover for fires. Read the fine print.
Key person insurance covers important individuals who are critical to the business, such as the owner, or top executive. The insurance company helps find a replacement and covers losses if the worst-case scenario happens and that individual can no longer run the company.
