Business Insurance Frequently Asked Questions
Learn the answers to some FAQ on business insurance.
? question. image by Bruno Bernier from Fotolia.com
- 1 What Is Bonding & Liability Insurance?
- 2 General Liability vs. Property & Casualty
- 3 Market Steering Wheel Covers
- 4 Business Liability Insurance Requirements
Most businesses will need one or more forms of insurance at some point in their startup or over the course of their existence. Insurance covers a wide range of potential liabilities for business owners, from property and casualty insurance that covers issues with the storefront or with individuals who may become injured on the premises, to business insurance that will provide income if the business is unable to operate due to owner illness or natural disasters. Many questions arise when trying to decide what type of insurance you will need for your business.
What Is Business Insurance Buy/Sell Agreement?
In the case of a partnership, a business’ interests are held by both individuals in the partnership. If one partner dies or is disabled or just loses interest in the business, a buy-sell agreement provides legal documentation and essentially insures that the other owner is able to buy out the partner or receive the partner’s share of the business through pre-determined terms laid out in advance. This is an important form of business insurance because it ensures that, if the unthinkable happens to one partner, the business can safely transition to continue thriving.
Do You Need Liability Insurance
The short answer to this question is yes. Depending on the type of business you are running, liability coverage can be more important than in other businesses, but all businesses will still want to have some form of liability coverage. A doctor’s office or medical practice is one example of a business where liability coverage is extremely important, but any business can benefit from being covered in the event that a customer or client is injured on the premises or by a product sold through the business.
What Factors Determine Cost of Business Insurance
A number of factors are involved in the cost of business insurance. The size and type of the business are the main determining factors, but a history of claims or other issues, as well as number of potential insurers competing for your business, can drive the price of your business insurance up or down.
About the Author
Alexis Writing has many years of freelance writing experience. She has written for a variety of online destinations, including Peternity.com. She holds a Bachelor of Arts in communication from the University of Rochester.
- ? question. image by Bruno Bernier from Fotolia.com
Cite this Article
Choose Citation Style
What Is Contingent Cargo Insurance?
Does the Economy Affect the Insurance Business ?
4 Insurance Questions That Small Business Owners Should Be Asking
Running a small business means pouring a lot of energy and effort into your company. To protect your venture’s future and to minimize your risk, you need insurance coverage for your small business. If you’re worried about costs or confused by all the options, Gunn-Mowery can help. Contact us to find out how our Upside of Insurance can help you get the right coverage.
To help you further, Gunn-Mowery has put together these insurance questions small business owners should be asking. These questions can help you start planning, so you get the right policy for your small company.
1. Why Do We Need Business Insurance?
When you run a small business, the thought of paying for insurance can be overwhelming, but there are several reasons protection for a small business owner is mission-critical:
- Your state or municipality may require you to carry some forms of insurance, such as workers’ comp coverage. Lenders, vendors and others you work with will likely also want to see proof of insurance.
- If you are accused of wrongdoing, the legal costs can be significant enough to close your doors if you don’t have insurance.
- Without insurance, you may be making your assets vulnerable, in some cases.
- Any disaster, such as a fire or theft, can threaten your ability to make payroll or survive as a small business.
2. What Kind of Insurance Does a Small Business Need?
Every organization is different, so companies may need various combinations of:
- Property & Casualty:This insurance covers you in case your business property is damaged or lost through theft, flood or fire.
- Business Interruption: If you are unable to run your business due to a covered cause of loss, this insurance covers your profit and cash flow losses.
- Liability: If you are ever sued, this type of insurance covers damages awarded and some legal costs.
- Business Auto: If you are using any cars in the course of your business, you are required to carry this type of policy.
- Workers’ Compensation:In most states, the law requires businesses to have workers’ comp. You may need this insurance on behalf of employees, so they are covered if they are ever injured on the job.
- Product Liability: If you sell a product, this insurance protects you in case the product is found to be faulty and causes injuries or harm to someone
- Health:This insurance covers part of the medical bills for yourself and any employees you have.
- Disability and Life:This insurance pays in the event of a disability or a fatality affecting a key team member, business partner or company owner.
3. How Can I Choose Between Property and Liability Insurance?
You don’t have to choose. In fact, it may be best for you to have both, depending on the nature of your business. If you are not sure about which coverage is most important, contact Gunn-Mowery to discuss your specific situations and get quotes.
4. Where Can I Buy Business Insurance?
You can buy insurance from your current insurance provider, but you may not know whether this is the best solution or the best rate for you.
An insurance company can only give you information about their products. Gunn-Mowery is an insurance agency, which means we can find and compare different rates and insurance products from different companies. This allows us to bring you the best range of options possible. That’s the Upside of Insurance with Gunn-Mowery.
Bring us your insurance questions, small businesses concerns and your desire for better rates. We’ll help you find the right insurance fit.
Business Insurance FAQ
Learn Business Insurance 101
What is Business Insurance?
Business insurance includes a broad range of policy options designed to protect a business from financial loss. Every commercial operation has its own unique set of risks, which means a commercial insurance policy must be tailored to the business. Many factors, from the size of your company, to the number of workers you employ, the materials they handle and whether you have business vehicles, will determine the specific coverage you need to mitigate risk and protect your company’s financials.
Many business owners find that they must turn to a number of different insurance companies to get all of the coverage needed to cover their risks. If you work with an independent agent in the Trusted Choice® network, you can get all of your business insurance policies from one office.
What Does Business Insurance Cover?
Business insurance coverage for a commercial operation can include the following and more:
- General liability insurance: Covers third party liability claims for injuries to other people.
- Professional liability and malpractice insurance: Covers professionals against loss due to negligent professional duty, wrongful acts, and advice and services that lead to another person’s loss or injury.
- Product liability insurance: Covers against faulty products and damage, illness, injury or death that may occur from using a faulty product.
- Property insurance: Covers loss and damage to your commercial business property due to fires, storms and other causes.
- Commercial vehicle insurance: Covers commercial vehicles and drivers for collision, liability, property damage, personal injury and “comprehensive” (now known as “other than collision”).
- Workers compensation: Covers your employees if they become ill or injured while working on the job.
- Loss of income: Covers your business expenses such as rent and employee wages if you can’t operate your business.
- Key person insurance: Covers loss of income that may result from the head of the business or other key personnel becoming incapacitated or passing away (also known as key man insurance).
- Cyber-crime insurance: Provides protection for risks due to Internet use and online communications.
- Records retention policies: Covers loss of important data and financial records.
- Specialty coverage: Insurance that covers various specific business risks, such as those of andlords, farmers, and commercial operations that put on one-day events, such as seminars or concerts.
How Does Business Insurance Work?
Business insurance is a contract between the insurance company and the business. The insurance company agrees to share the business risk with the business entity in exchange for premium payments. In the event of a covered loss, the insurance company pays for the financial losses the business incurs up to the limit of the policy after the deductible amount is paid by the business filing a claim.
At the time of a loss, the business will typically file a claim. If a fire destroys a portion of the business premises, for example, the company will file a claim against the property insurance policy. An adjuster will assess the damage and process the claim. The company will then receive the appropriate amount of compensation for the loss.
There are many different scenarios with regard to business risk and how insurance claims are filed. For example, in the event that the incident is a loss suffered by a customer of the company, the injured party will likely file a claim against the businesses’ liability policy. How the claim is processed depends upon the size of the claim, whether the matter can be settled with an insurance payment, and if the claim results in a lawsuit.
How Much Is Business Insurance?
The cost of business insurance varies. A number of factors affect how much business insurance costs, because it depends on the type of business and the types of coverage appropriate for that commercial operation. Cost also depends on the size of the business. A small, home-based business can often be adequately insured for $500 per year, while insurance for a large company with many employees and a wide range of business risks could $500,000 per year.
The costs of business insurance can be reduced with effective risk management practices, and by comparing costs from several different insurance carriers. An independent agent in the Trusted Choice network who specializes in commercial insurance can help with this process, and can manage a company’s complete business insurance portfolio through one office.
Is Business Insurance Tax Deductible?
Business insurance is tax deductible, as long as the coverage is for the purpose of operating a business, profession, or a trade. Businesses may not deduct their business insurance premiums if the coverage is for the purpose of a self-insurance reserve fund or a loss of earning insurance policy.
Is Business Insurance Required by Law?
Business insurance is required by law, but only under certain conditions. The following business insurance is required by law if it is applicable to your situation:
Unemployment insurance: Applies to a business that has employees and may be obligated to pay unemployment insurance taxes under prescribed conditions; if these conditions are applicable to your business, then you must register your business with the state work force’s agency.
Workers compensation insurance: If your business has employees, you are most likely legally obligated to carry workers’ compensation insurance, either on a self-insured basis or through a commercial insurance carrier or a state worker’s compensation program. Workers compensation laws vary by state.
Professional liability insurance: Some states require specified professionals to carry insurance against professional liability.
Disability insurance: Several states require that a business have partial wage replacement insurance coverage for employees eligible for non-work related injury or illness. These states include California, Hawaii, New Jersey, New York, Puerto Rico and Rhode Island.
What Business Insurance Do I Need?
Depending on the nature of your business and any insurance which you are legally obligated to carry, the following types of business insurance should be considered essential:
- General liability insurance: Coverage against accidents, injuries and negligence claims
- Product liability insurance: Coverage against product defects
- Professional liability insurance: Covers professionals against malpractice, negligence or errors
- Commercial property insurance: Covers against damage to your business property, such as from fire or a severe storm
- Business interruption insurance: Protects your business if you are no longer able to conduct your business because of a loss
- Home-based business insurance: Covers against general or professional liability.
Because commercial insurance needs to be tailored to each business based on risks, it is critical to work with an agent who will get to know your company and ensure that your coverage adequately protects your business investment.
Does Business Insurance Cover Embezzlement?
If your business carries commercial crime/theft coverage, your business insurance will cover employee fraud and embezzlement.
There are several different forms of employee dishonesty coverage. For example, you can purchase several types of fidelity bonds, either to protect the business in the event of dishonest acts by all employees, or by named employees.
Does Business Insurance Cover Flood Damage?
In order for your business insurance to cover flood damage, your company must carry a separate flood insurance policy or endorsement. The typical commercial property insurance policy covers specific water damage situations but excludes flooding. The wording and water damage exclusions vary from one insurance company to another. Be sure to review your policy carefully and discuss your specific risks and concerns with an independent agent in the Trusted Choice network who can help you get the coverage you need.
Does Business Insurance Cover Lawsuits?
Business insurance covers lawsuits as long as you have the appropriate business liability insurance for your situation and enough liability coverage to pay your legal costs. To ensure that enough liability coverage is in place for extreme circumstances like a lawsuit that exceeds $1 million in damages, many businesses buy a commercial umbrella liability policy.
Certain liability exclusions also apply, such as if an injury or damage was expected, or was caused intentionally. Some policies also have something called a “workmanship” exclusion, and some exclude coverage of punitive damages. Liability insurance is available in many different forms, including:
- General liability
- Professional liability, “errors and omissions” and malpractice
- Directors and officers liability
- Product liability
- Premises or property liability
- Employer’s liability
- Employment practices liability
- Environmental and pollution liability
What Does General Liability Insurance Cover?
General liability insurance provides insurance protection for a company’s assets, financial obligations, legal defense, and any settlements or judgments awarded to an injured party. It may also include claims for copyright infringement, false or misleading advertising, or libel and slander. If a patron is injured in some way in the course of doing business with your company, your general liability insurance will provide coverage.
What Is Errors and Omissions Insurance?
Errors and omissions insurance (or “E and O”) covers a business for a service rendered which did not have the expected or promised results, or which results in a loss or personal injury suffered by the person receiving those services. It also covers situations where the individual or company failed to render service at all. These are known as errors and omissions. As an example of errors and omissions insurance, if a financial advisor provided investment advice that resulted in a client’s financial loss, those circumstances could result in an errors and omissions liability claim.
This type of insurance is also known as malpractice insurance (for medical practitioners) and professional liability insurance for practicing lawyers and other professionals.
What Is a Business Owner’s Policy?
A business owner’s policy or “BOP” is insurance coverage designed specifically for small or medium-sized businesses. Depending upon the insurance company, the size of business that qualifies for a business owner’s policy may be based on revenues or number of employees. A BOP combines several types of insurance coverage in a packaged format, and can be customized to suit a particular business. Generally, this type of policy includes both property and liability coverage.
Policies may also provide coverage to include the following:
- Property claims
- Breakdown of equipment
- Loss of income/business interruption
- Professional liability
- Copyright infringement
- Products and completed operations
- Premises liability
How Do I Get Business Insurance?
There are a variety of ways to purchase business insurance. You can shop online, or call an insurance company representative. However, business insurance policies vary a great deal between companies, as do the cost of premiums. Therefore, your best course of action is to talk with an independent insurance agent who can check rates from several different insurance company to find you the best quote available.
An independent agent in the Trusted Choice network who specializes in commercial insurance can design a policy specifically for your business. Independent agents have access to numerous insurance companies, which means they can customize your commercial insurance policy and meet all of your business insurance needs out of one office.
Find a local member agent in your area, and get the business insurance you need to protect your company’s bottom line.