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Commercial Insurance: 4 Policies to Consider When You Start Your Business

6. April 2016 07:46

woman holding an open sign in a bakery

Thinking of joining in the great American tradition of starting your own business? That’s awesome! Maybe you’ve found an untapped market, or you’ve noticed people really respond to your talents – your delicious baking skills, your excellent computer know-how, or your passion for everything model trains – and you’re ready to make some dollar bills.

For a brand-new business owner, there are many considerations before you open up shop, such as which commercial insurance policies should you consider? And what do you need insurance for, anyway?

This guide is for you, brave entrepreneur.

Why Should I Have Commercial Insurance?

The short answer: you should purchase commercial insurance if you want to better protect your assets. By assets, we mean your property and your savings – both business and personal.

For certain types of businesses, being licensed and legally allowed to work require having specific insurance policies in place (most often for regulated industries like trade skills, construction, medicine, etc.). Make sure you’re aware of your insurance requirements before announcing to the world that you’re open for business.

Business insurance can help cover the expenses of liability lawsuits and property damage so that you don’t have to sell off or spend everything you have just for your business to survive. You might think of it as a kind of business airbag, able to take most of the financial impact of a mishap or accident for you. Covered expenses could include…

Should I Get New Business Insurance Right Away?

There are a couple reasons you may want to consider getting commercial insurance right when you start a business:

If you’re working out of your home, chances are your homeowners or renters insurance won’t cover you for business-related accidents. So if a customer visits your home office, slips on your kid’s toy truck, and sues you for his broken ankle, you may be out of luck if you’re relying on your home coverage to cover you.

Commercial insurance is made for these kinds of scenarios. You can be protected from day one.

How Much Does Commercial Insurance Cost?

For many small businesses, commercial insurance is very affordable. The median cost of a policy is around $500 per year, or $42 per month, according to our cost analysis. Considering that the cost of a lawsuit can easily stretch into tens of thousands of dollars in expenses (more on that in "Your Business Is Facing a Civil Lawsuit. Now What?"), a small business insurance policy is extraordinarily cost-effective as a means of financial protection.

Still, you probably don’t want to “over-protect” yourself. Depending on your business, you may benefit from some types of coverage and not others, so don’t throw your money away on a policy if it won’t do anything for you. As your business grows and changes, you’ll want to consider adding policies to cover new exposures.

4 New Business Insurance Policies You Should Consider

Now we reach the good stuff! When starting a new business, these are the four polices most likely to benefit you. Take a look to see which ones can help your business.

1. Business Owner’s Policy

This is the key player right here. A Business Owner’s Policy, or BOP, combines the protection of General Liability Insurance and Property Insurance into one convenient, discounted bundle for small, low-risk businesses. It can provide coverage for:

2. Professional Liability Insurance or Errors & Omissions Insurance

These are essentially the same policy, but called by different names in certain industries. This is important insurance to have if you offer professional services, because it provides coverage against claims that you made mistakes or failed to provide adequate service. Professionals that typically carry this coverage include…

3. Cyber Liability Insurance

Cyber liability is a rapidly-growing area of concern as more businesses become targets for cyber criminals. If you store lots sensitive of information about clients or customers, you may want this coverage in case of a cyber-disaster.

4. Commercial Auto or Hired and Non-Owned Auto Insurance

Just as your homeowners insurance isn’t likely to cover you for business-related accidents, your personal auto insurance probably isn’t sufficient either. If you use a company vehicle (or your personal vehicle is the company vehicle), look into Commercial Auto Insurance. If you rent a vehicle for use or your employees use their own cars to do work-related tasks, then you might want Hired and Non-Owned Auto Insurance to protect them.

This isn’t an exhaustive list of commercial insurance policies, just the ones most likely to benefit a brand-new business. Talk to your insurance agent about what exposures your business has and what kinds of policies can address them. New business insurance doesn’t have to be confusing if you know what you’re looking for.

Tags:

Business Owner's Policy | Commercial Auto Insurance | Cyber Risk Insurance | Errors and Omissions Insurance | General Liability Insurance | Professional Liability Insurance | Property Insurance | Small Business | Small Business Risk Management | Tips for All Small Businesses

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