Liability Insurance vs. Property Insurance
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Liability Insurance vs. Property Insurance

If you’re new to the world of business insurance, your endless coverage options may seem more like a curse than a blessing. How do you know which policies you need? What do the different types of coverage actually do?

Of course, your insurance agent can answer these questions for you, but if you want a base level of understanding before you get your feet wet, you’ve come to the right place. Let’s explore the differences between types of small business insurance policies.

Property and Liability Insurance Policies: Birds of Different Feathers

Business insurance policies can be sorted into two categories: those that cover property loss and those that handle liability expenses. Property policies are pretty easy to understand because they simply protect your assets. You – the policyholder – will be compensated when certain covered events make it impossible for you to use your property. For example, property coverage kicks in when…

  • The wind knocks a huge branch on top of your office building and destroys the roof.
  • A fire demolishes your restaurant’s kitchen equipment.
  • A thief breaks into your office and steals your computers.

Sometimes the property is destroyed. Sometimes it can be repaired. Either way, a Property Insurance policy can cover the cost of getting your business’s building and gear back in working order.

Liability policies are a little more complicated. These step in when your business is responsible for someone else’s losses. Those losses may take many forms, and each policy usually covers specific kinds of loss. For instance, General Liability Insurance covers your lawsuit expenses when someone sues you over the bodily injuries they sustained on your commercial premises.

Liability policies typically compensate you for…

  • Lawyer fees.
  • Court costs.
  • Investigator bills.
  • Settlements or judgments.

You can learn more about the differences between certain policies by checking out our page, “Business Insurance Comparisons.”

Two Primary Business Insurance Policies

Most small-business owners benefit from carrying Commercial Property and General Liability Insurance. These two policies offer a strong foundation of coverage and address some of the most common issues small businesses face.

If you want to keep insurance costs in check, you may want to look into a Business Owner’s Policy (BOP). This policy bundles General Liability and Property Insurance together at a reduced rate. Your business may qualify for the package if…

  • Your company is a small business. This means you only have a certain number of employees and your premises meet a provider’s square footage threshold.
  • You work in a low-risk industry. Not all businesses have the same exposures. For example, a marketing firm may have less risk than a construction business.
  • You only need 12 months of Business Interruption Insurance. This coverage is included in most BOPs. It reimburses you for lost income when a covered property loss forces you to halt business operations.

Other Important Business Insurance Policies

Though General Liability and Property Insurance offer an array of coverage, they don’t cover everything. For example, General Liability won’t protect you if an employee sues your business over their work injuries. That’s why you may also need…

  • Workers’ Compensation Insurance. Workers’ Compensation Insurance is a state-mandated coverage that pays for your employees’ medical bills and lost wages when they suffer an occupational injury or illness.
  • Errors & Omissions Insurance. Also called Professional Liability Insurance, E&O is a liability coverage that protects you when someone claims your business’s negligence caused them financial losses.
  • Umbrella Liability Insurance. Umbrella Insurance can be applied to certain other liability policies when their limits have been reached. Think of it as a safety net in case you need more coverage for a claim.

Have more questions? Contact an Insureon agent for guidance about your small business’s insurance needs.