Purchasing Business Insurance

| December 28, 2012

Understanding which insurance coverages are mandatory from those that are not will help new small business owners determine the right types of insurance to buy.

As an entrepreneur and small business owner you have many decisions to make to ensure the proper running of your business. If you’re just starting your business, there is yet another decision to make. What type of insurance to buy.

The field of business insurance may seem overwhelming, but if you take it logically one step at a time it’s not so bad. Armed with information about your business and the help of a qualified insurance agent or broker, the process of purchasing insurance should go smoothly.

To help make your decision process easier, below is an outline of the basic coverages every business should consider.

Mandatory Coverages: These are the business insurance coverages required by either the Federal Government or the state in which you live. These policies are not optional.

  • Workers Compensation: This policy provides coverage for employees who sustain work related injuries and/or illnesses. Additionally, it provides protection for the employer from suits in the event the employee elects to forfeit the workers compensation benefit and sue the employer instead.
  • Disability Coverage: This coverage is mandatory in New York, New Jersey, California, Hawaii, Rhode Island and the Commonwealth of Puerto Rico. It provides coverage for disabilities resulting from non-occupational injuries or illnesses. Each state’s requirement may differ so it is important to discuss this coverage with your agent.
  • Business Automobile: Vehicles registered in the name of the business must have a business automobile policy. Business auto coverages differ slightly from personal auto coverage. Be sure to discuss the differences with your agent.

Business insurance coverages that may be required by contract:

  • Commercial General Liability: This policy will protect your business in the event of suits brought against you by a third party. This includes slips and falls at your premises. Additionally, depending on your type of business, your customer or supplier contracts may require that you maintain this coverage.Business Insurance
  • Umbrella: Umbrella liability is just as it sounds. It provides liability coverage above the limits of the underlying automobile, general liability and employer’s liability (workers compensation)coverages.
  • Property: Property policies protect your buildings, contents and equipment. At the very least, if you rent your business space, you should insure your contents and equipment. If you lease equipment, it may be a contractual requirement that you keep the equipment covered under a property policy. There are various types of property coverages that are more tailored to suit your business insurance needs. Your insurance agent will help you to determine which property coverage is best for your business.

Not required, but nice to have:

  • Life and Health Insurance: These are not mandatory business insurance coverages, but being able to offer them to your employees will make them happy. It might be the difference between keeping your valued employees or your competition luring them away.

Above all, it is important to have an agent or broker that understands your type of business so they may offer appropriate advice in insuring your business.

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Category: Insurance

About the Author ()

Felicia A. Williams is a wife, mother, freelance writer and owner of Tidbits About Money.

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