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What Is Business Insurance & What Does It Cover?

Updated: November 25, 2022

Businesses need insurance just like any other company or individual. Businesses also require coverage for different risks, from financial losses to potential lawsuits. In fact, business risk is even more prevalent in this industry than in any other.

That’s because businesses operate on a daily basis, and they can be hit with any number of risks at any given time. These risks can range from natural disasters to hacking attacks. Or any other type of risk that could negatively impact your business or its employees and owners.

Businesses need business insurance coverage for many of the same reasons and in the same ways as a personal or household business. It protects your business from financial losses and liability in the case of any type of risk that could negatively impact the company.

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    KEY TAKEAWAYS

    • Business insurance protects you, your employees, and your customers.
    • There are many types of risks that businesses face, from natural disasters to hacking attacks.
    • Businesses need insurance coverage for many of the same reasons as a personal or household business.

    What Is Business Insurance?

    Business insurance is a policy that protects your company from potential financial losses and/or liability. This type of coverage is essential for any business owner. Business insurance serves to protect against financial risks. Such risks can negatively affect your business.

    Some of the most common types of business insurance include:

    • Property insurance
    • Liability insurance
    • Workers’ compensation insurance
    • Business interruption coverage
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    What Does Business Insurance Cover?

    Business insurance covers a wide range of risks that could negatively impact your business. These include:

    Damage to Your Property

    This includes damage to inventory, equipment, and other items that your company owns.

    Loss of Income

    This includes money that your company earns that becomes lost because of a natural disaster. It can also be events that prevent an employee from coming to work.

    Health Care Benefits for Employees

    This covers the cost of medical expenses for employees who suffer injuries or get sick because of their job.

    Legal Fees

    This covers legal fees from lawsuits filed against your company.

    Contractual Obligations

    This includes things like lease obligations and lease termination fees.

    Business Interruption

    This covers your lost revenue if your business gets interrupted by a natural disaster or similar event.

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    Types of Business Insurance

    As a business owner, it’s important that you invest in the right insurance. You want to ensure that your employees are cared for and covered. You also want to make sure your property has protection in the event of a natural disaster or vandalism.

    Let’s explore some of the most common insurances for businesses. We’ll also discuss what they cover so that you can determine what you need.

    Business Interruption

    This covers lost revenue and future expenses if your business gets interrupted by a natural disaster or attack.

    Property Insurance

    This protects your things of tangible value, like furniture, fixtures, and business equipment. Your personal assets require protection just like your employees. This is true whether you run a home-based business or work in a commercial building.

    Other protected items of tangible value include inventory, machinery, and buildings. Damage to property can skyrocket quickly. So you want to know that you have the right types of insurance. This includes commercial property insurance.

    You’ll need to speak with your insurance agents about which is right for you. The type of business insurance you need depends on various factors.

    Commercial Auto Insurance

    Do you have company vehicles? If so, you’ll need additional coverage for them. You want your business insurance policies to protect not just your physical assets but your workers, too. Commercial auto insurance protects against third-party injuries. So if a worker gets in an accident, you won’t be financially liable.

    This can include bodily harm to another driver. So you’ll want to fully understand your policy limit and coverage limits. Ask what your commercial auto insurance entails.

    Workers’ Compensation

    This covers the costs of medical expenses and lost wages if employees get injured on the job. When an employee suffers a bodily injury at work, you need to know you’re protected. Workers’ Compensation insurance gives you peace of mind that you won’t get a liability claim against you.

    Malpractice Insurance

    If you’re a medical provider, you need malpractice insurance. This protects you from liability if you cause harm to a patient. Malpractice lawsuits are often complex. You could have to pay potential damages if your practice doesn’t have coverage. So it’s crucial that you have insurance protecting you.

    Professional Liability Insurance

    Professional liability insurance is a policy that protects you from claims of negligence. This can also include claims of wrongdoing made against the business. A business may not know who their clients are or which of their employees have caused a claim against them.

    If a person or business gets sued for negligence, they will want to prove that they did not act negligently. This is where professional liability insurance comes in. Medical costs associated with these lawsuits can be pricey.

    As such, you want to make sure that you have financial protection. Talk to a licensed agent about the best insurance package for your firm. You might need additional insurance plans to limit your risk. But the investment is worth it.

    Financial Responsibility

    This covers the expense of any damage or loss that is not covered by another type of policy. Think of this as commercial umbrella insurance. This ensures that you have ample insurance protection. 

    The best business insurance plans are ones that accommodate your needs. Your business owners insurance policy should entail everything your business needs. This includes employees, vehicles, liability, and more.

    A business without insurance is at risk of financial ruin. An accident is all it takes to wipe you out. Don’t chance it; get business insurance where you need it most.

    Summary

    Business owners don’t want to miss out on the potential profits that come with owning a company. That’s why they need to protect their investment with business insurance coverage. Business insurance protects against financial losses and liability in the case of any type of risk that could impact the company.

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    Frequently Asked Questions about Business Insurance

    Do I really need business insurance?

    Businesses require business insurance to cover property damage and liability claims. Business owners who do not have business insurance may be forced to pay for expensive damages or legal claims against the company.

    How is business insurance calculated?

    You calculate business insurance based on a variety of factors. It includes the type of business, the size of the business, the location of the business, and the potential risks associated with the business.

    Do I need business insurance to work from home?

    If you have clients or customers who come to your home, then you may need business insurance. This will protect you in case of an accident or injury that occurs on your property. If you work from home but do not have any clients or customers coming to your home, then you may not need business insurance.

    Is business insurance paid monthly or yearly?

    You can pay business insurance monthly or yearly. The frequency of payment will depend on the type of policy and the insurer. Some policies may require that you pay the entire premium upfront, while others may allow you to pay monthly or quarterly.

    What can business insurance do to help a business?

    Business insurance can help a business by protecting the business from financial losses. These losses may occur as a result of accidents, injuries, or damage to property. This type of insurance can also help to cover the costs of legal fees and settlements if the business gets sued.

    Are business insurance claims taxable income?

    In most cases, business insurance claims are not considered to be taxable income. However, you should always check with your accountant or tax advisor to be sure.

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