To protect themselves from personal liability in business, many entrepreneurs register as a limited liability company (LLC) or a corporation. This is essential for protecting personal assets if legal action is taken against a business, but it’s not the same as having proper insurance for a business.
Some business insurance types are federally mandated, such as unemployment, disability, and workers’ compensation. Other business insurance may be a legal requirement depending on the business type and the state in which it operates. Access to some loans, grants, and other advantages may only be open to applicants with active insurance policies.
Whether required or optional, business owners should be familiar with different types of business insurance. Appropriate insurance coverage can provide peace of mind at the best of times and prevent detrimental financial loss when the unexpected happens.
Depending on the insurance type, provider, and owner policy requirements, business insurance holders can expect to choose from standard and optional coverage specifics as well as a deductible. An agent will then provide policy costs, usually broken down into monthly, quarterly, or annual fees.
Except for commercial property insurance, cyber liability, business identity, commercial fleet, and key person insurance, most business insurance provides a payout to the affected parties. This saves the business from losing finances and assets in the process of providing compensation.
Types Of Business Insurance
Some business insurance types apply to any type of business, while others are relevant to business based on their structure, where they operate, the quantity of property or assets that must be covered, number of employees, and other qualifiers.
Just about any business can invest in general liability insurance to cover or limit financial losses due to injury, medical expenses, property damage, libel, slander, lawsuits, and other litigation.
Professional liability insurance is relevant to businesses that provide services directly to customers and will protect against financial loss due to errors, negligence, and malpractice. Businesses that manufacture and sell products may choose product liability insurance to cover losses in the event of injury or harm caused by a defective product.
Commercial property insurance will cover damage to physical property due to fire, vandalism, and other events. For small business owners, small business hazard insurance provides similar coverage to commercial property insurance.
If the business is operated out of the owner’s home, home-based business insurance includes coverage that protects business equipment located in the home and covers liability for third-party injuries, filling in gaps that are not covered by homeowners insurance.
Sometimes different aspects of coverage will be combined into a business owner’s policy (BOP), which is meant to simplify the insurance buying process for home-based business owners. These are not the only insurance types that pertain to small business owners.
If the business operates using a vehicle, then commercial auto or fleet insurance may be a necessity. If the business provides digital services or goods or may be vulnerable to cybercrime, cyber liability insurance may be beneficial.
How Much Does Businesses Insurance Cost?
Since starting any business requires capital, business owners are wary of the insurance cost for business coverage and how it will impact their budget. Business insurance costs can fall within a wide range depending on the size and nature of the operation, the number of employees and annual payroll, the industries served, current rates, prior claims, and policy specifics.
The best way to make the most cost-conscious choice for individual business needs is to assess the type of minimum coverage required and get quotes from multiple providers.
Although there are many factors affecting what a business can expect to pay, the average monthly cost for a general liability policy is $53, $84 for a business owner’s policy, and $63 per month for hazard insurance.
Monthly costs can be reduced by bundling coverage into one policy, prepaying annual premiums, increasing deductibles, and implementing risk assessment and mitigation practices.