Business insurance is a broad description that can be broken down
into a list of nine types of insurance policies and here I will briefly
explain the coverage and expand on these as individual topics. For now,
these are general descriptions so that we are talking about the same
thing when I use these terms in later articles.
Property
insurance insures against loss or damage to the location of the
business and its contents. It can also insure the property of others in
your control when the loss occurs. Property insurance can be for a
specific risk. For example, a fire insurance policy insures only
against a fire loss to the location. A tornado is not a fire and,
therefore, that loss would not be covered. The insured location can be
owned, leased or rented.
Some
insurers will lump property and casualty insurance together and refer
to the coverage as property and casualty insurance. In fact, packaged
policies of property and casualty are often the best purchase a
business owner can make. However, to have an understanding of the
difference between the coverage, I will discuss this as a separate type
of insurance. Casualty insurance insures against loss or damage to the
business.
Liability
insurance insures against liability legally imposed upon your business
because of the negligence of the business or its employees. Put another
way, it protects your business when the business is sued for negligence.
Your
personal automobile policy does NOT cover vehicles used by your
business. If your business uses vehicles or anything that is required
to be titled by your state, then you need a commercial auto policy.
Commercial auto coverage insures against property damage to vehicles
and damage caused to others by those vehicles.
You
will need to insure your employees against on-the-job injuries. Every
state is different. But, most states have put into place some form of
workers' compensation system. Workers' compensation is a system where
the employee is not allowed, by statute, to sue their employer for
on-the-job injuries; but, in return, the employer must participate in a
system that provides nearly automatic payment to the employee in case
of injury for medical bills and damages. There are many options for
workers' compensation coverage. Some states allow an employer to
opt-out of the system if the employer is self insured, some run the
system through private insurers while others use state agencies.
Business
interruption insurance insures against loss or damage to the cash flow
and profit of a business caused by the business being unable to operate
because of interruption. The easiest example is to think about a
critical piece of machinery being struck by lightning. The repairs to
the machine may be covered by other coverage such as property or
casualty insurance. But, if you can not make widgets for three months,
than there is no replacement of that income without this coverage.
To
be competitive, most businesses need to offer their workers health
insurance. This insurance offers a health coverage benefit to your
employees (and you).
Life
and disability insurance protects the business against the death or
disability of key employees. For example, one partner carries a life
insurance policy naming the partnership as a beneficiary. If that
partner dies, and the business has planned properly, the proceeds of
the policy can be used by the business to buy out the share of the
decedent's partnership interest from the estate.
It
could very well be that your business is so unique to have need for
coverage that is a mixture of some of the coverage listed above or
something written specifically for your particular risk. One can think
of some actresses, actors, or sports stars that have had legs insured
at some point in there careers. This would be an example of a scripted
policy.
