Property insurance and liability insurance provide different forms of protection, and both types of coverage are necessary to protect a small business.
You likely already know the importance of commercial property insurance, also called business hazard insurance. Small businesses rely on this policy to safeguard their assets from fire, damage, and theft. Many landlords require you to carry commercial property coverage before they will rent office space.
Property damage is only one risk of running a business; there's also the risk of lawsuits. Someone could sue your business for a variety of reasons, including personal injury, damage to their property, professional mistakes, and unfair hiring practices.
Businesses typically carry multiple forms of liability insurance to protect against different kinds of lawsuits. The most popular is general liability insurance, which covers common lawsuits involving customers and other people outside your business.
Together, commercial property insurance and liability insurance help ensure that you are prepared for unforeseen events that could bring your business to a halt.
When you buy property insurance, your insurance company can insure equipment, computers, supplies, inventory, your office space, and other business property against loss or damage.
Property insurance covers damage that results from the specific events outlined in your policy. Common covered events include:
A property insurance policy covers your expenses up to your policy limit, and some policies provide coverage for income you lose if your business has to shut down after a covered event. This is often called business interruption insurance.
Commercial property insurance isn't the only property policy that small businesses can buy. You may be able to find another type of property insurance that better fits your business.
For example, carpenters might buy contractor's tools and equipment insurance to protect the tools of their trade. This is typically an inexpensive policy designed to protect newer tools and equipment from theft, vandalism, and work accidents.
A “liability” is something that your business is legally responsible for. When you are held liable for causing someone a loss, you are responsible for making up the loss. For example, a customer could hold you responsible for medical bills if their injury happened at your storefront or office.
Liability is often determined as the result of a lawsuit or legal judgment. Business liability insurance helps you pay for expenses related to a liability claim, including legal defense for a frivolous claim.
Say an advertising agency rolls out a new social media campaign for a local restaurant. What happens if the restaurant’s sales don’t improve? It could sue the advertising firm, claiming it failed to fulfill its professional responsibilities.
The firm must now hire lawyers and work through potentially lengthy court proceedings – the final cost could be huge. Because small businesses don't have that kind of money, they invest in policies that offer liability coverage for:
You might need liability insurance to fulfill the terms of a lease or contract, or protect against lawsuits brought by employees or people outside your business. Here are some of the most common types of liability insurance:
General liability insurance is often the first policy that a small business buys. A general liability policy covers the cost of common third-party lawsuits, such as a customer who sues your business over a bodily injury or property damage. It also covers lawsuits related to advertising injuries, such as copyright infringement and defamation lawsuits.
Professional liability insurance, also called errors and omissions insurance (E&O), is crucial for consultants and others who provide advice or professional services, such as lawyers and doctors. This policy provides financial protection against clients who sue over a mistake or oversight, including missed deadlines.
Cyber liability insurance is important for businesses that handle sensitive data, such as credit card numbers. It helps pay expenses related to data breaches and cyberattacks. For example, it could cover the cost of notifying affected customers after a data breach exposes their personal information.
Employment practices liability insurance (EPLI) provides financial protection against lawsuits brought by employees who sue your business over wrongful termination or another violation of employees' rights.
Commercial auto insurance covers the cost of accidents involving your business-owned vehicle. For example, it could help pay for medical expenses and legal bills if an employee driving your company car rear-ends another vehicle and someone is injured.
Commercial umbrella insurance boosts coverage on your other liability policies. For example, if a claim exhausts the limits on your general liability policy, your umbrella policy would activate to cover costs.
Read more about which types of insurance you might need.
As a small business owner, you might qualify for a lower insurance rate if you purchase a commercial property policy together with general liability coverage. This insurance bundle is called a business owner's policy (BOP), and offers a chance to save money on both policies.
Bundled insurance is a practical way to get your general liability and commercial property insurance, but you may face other risks that require different coverage.
When you buy commercial property insurance or liability insurance, you can choose the amount of coverage. For example, the policy's coverage limits should match the value of your business property or your risk of being sued.
In many cases, you can also choose your deductible, which is the amount you pay out of pocket before coverage begins on a claim. You can save money by opting for a higher deductible – just be sure to choose an amount you can afford, to ensure you can benefit from your insurance coverage when you need it.
With property insurance, you can also choose to insure your property for its actual cash value or its replacement value. The former is an item's current value; the latter is how much it would cost to buy a brand-new item to replace the one that was lost.
Insureon works with top-rated insurance providers to help you find the right property and liability protection at the best price for your business. Start a free and easy online application today to review options for commercial general liability insurance and other important policies. Our licensed insurance agents are standing by to assist you.