Understanding Small Business Insurance

Regardless of the size of your company or the number of people it employs, it is essential to carry adequate insurance. Failure to do so could result in financial ruin or the dissolution of your business.

There are countless different types of small business insurance available including liability insurance, property insurance, business interruption insurance, workers’ compensation insurance and flood insurance, just to name a few.

Rather than buying separate insurance policies for all of these different concerns, many small business owners buy what is known as a Business Owner’s Policy (BOP).

BOPs typically bundle three types of insurance together: property insurance, general liability insurance and business interruption insurance. The following section looks at how each of these types of insurance can help protect your company.

Property Insurance

Like its name implies, property insurance helps protect any physical property that is owned by your business. This includes items like computers, furniture, equipment, supplies and inventory. This type of insurance usually includes coverage for accidental damage or destruction caused by fires or other catastrophic events.

General Liability Insurance

The second type of insurance included in a BOP is general liability insurance. This type of insurance covers any damage that is done to someone else’s property or person by you or one of your employees. For instance, if you operate a moving company and one of your employees accidentally breaks a homeowner’s vase, the liability insurance will help cover the cost of the broken vase.

Business Interruption Service

The third, and perhaps most important, type of insurance that is included in a BOP is business interruption insurance. This type of insurance helps cover the loss of income that you suffer if your business is unable to operate.

For instance, if a hurricane comes through and wipes out your facility, the insurance would help cover the cost of the downtime while you get your company back on track. Typically this type of insurance also helps cover any extra expenses that are incurred if you are forced to move to a temporary location.

What is Not Covered by a BOP

A BOP covers the basics for most small businesses. However, there are some things that it does not cover that you may need, depending on your location and whether or not you have employees. Here are a few of the additional types of insurance you may need to purchase.

Workers Compensation Insurance

If you have employees, you will need to purchase a workers compensation policy for them. This covers expenses for work-related injuries.

Flood Insurance

If you live in an area that experiences frequent floods, you will need to purchase flood insurance separately from your BOP. A flood insurance policy usually will cover your building and its contents.

Industry-Specific Insurance

Depending on the industry that you are in, there may also be other types of insurance that you need to carry. It is important to meet with a qualified insurance agent who is familiar with your industry to make sure you are adequately covered.

Small business insurance is absolutely essential. It helps protect your company from financial ruin in the event of an accident or natural disaster. Knowing which policies to carry is the best way to safeguard the future of your business.