Like individuals, businesses also need protection in the form of insurance. The average individual uses four types of insurance (health, life, auto, and home/renters), while the average business needs many more types of insurance.
Each type of business insurance serves a different purpose, but the main goal is to prevent businesses from losing a lot of money. Here are five types of business insurance that will help protect businesses from expensive lawsuits and other claims that may happen during normal business operations.
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#1: Commercial Auto Insurance
If you or any of your employees drives a motor vehicle for business purposes, then you’re going to need commercial auto insurance. This should be a separate insurance policy from your (and your employees’) personal car insurance, because personal car insurance doesn’t cover work-related car accidents. Depending on the policy you choose, commercial auto insurance covers a variety of things, such as:
- Bodily injury
- Collisions
- Medical payments
- Property damage
- Rental car costs
- Uninsured/underinsured motorists
This type of insurance protects your business from various claims while you’re out on the road, in the same way that general liability insurance protects your business from claims while people are on your property.
#2: Data Breach Insurance
Having data breach insurance is a good way to ensure the security of your business. Because we live in a highly digital world, just about every business stores some type of personal information of their customers/clients— even if it’s just for a short period of time. Personal information includes things like financial and medical records, driver’s license numbers and social security numbers.
Cyber criminals are very crafty, so don’t assume that a data breach could never happen to you. Data breach insurance covers the cost of notifying those whose information was compromised during the data breach, if a client chooses to sue because the data breach hurts their business, and the cost of credit monitoring services to the victims of the data breach.
#3: General Liability Insurance
All businesses need general liability insurance (GLI) because it provides protection against some of the most common claims that occur during business operations. One of the biggest claims that is protected under GLI is bodily injury, or premises liability. If a customer or client gets injured because of a poorly maintained property, they have every right to ask for compensation. GLI can help cover their medical bills— which you as the business owner may be legally obligated to pay.
GLI also covers damage to your customers’ property (such as if you were delivering packages), slander/libel, and claims of copyright infringement. Basically, if any person or entity can sue you for damages, you’re covered under GLI.
#4: Professional Liability Insurance
Also known as errors and omissions (E&O) insurance, professional liability insurance is most often needed by businesses that provide services to clients. Examples include mechanics, therapists, and lawyers. Everyone makes mistakes now and then, and clients can even sue you if you didn’t make a mistake. Claims of inaccurate advice, misrepresentation, and negligence can cost you thousands of dollars, so it’s important to make sure that you’re covered with professional liability insurance.
#5: Workers’ Compensation Insurance
Customers and clients aren’t the only people that can get hurt on your property. You must also consider your employees. Workers’ compensation insurance helps cover the cost of medical treatment, disability benefits, lost wages, and even death benefits if one of your employees gets injured or killed on the job.
Most states in the U.S. require businesses to have workers’ compensation insurance in the event that their employee gets injured or killed on the job. However, employees must keep in mind that this doesn’t cover injuries that occur outside of the workplace, such as going to or leaving from work.
As a business owner, you must make sure that you’re running your business in a safe and professional way to avoid claims that can lead to expensive lawsuits. Of course mistakes happen and customers and clients may perceive an incident that didn’t really occur, but it’s still good to have this type of protection for your business.
Depending on your personal business and circumstances, you may need all of these types of insurance (commercial auto insurance and professional liability insurance are only needed for specific types of businesses). Look at the type of business you run, evaluate all of the possible risks associated with your business, and then you’ll be able to decide exactly which types of business insurance you need.
