Anyone who operates a business needs a basic level of business insurance coverage, but how much? The wrong time to discover that you are lacking coverage is when you need it. That's why you should have a solid working relationship with insurance professionals who understand your business. The list below will get you started, by introducing key types of business insurance that every professional needs to understand.

Typical Coverages

Worker's compensation:

This business insurance compensates workers who are injured on the job. You are required by law to provide this coverage, but you will probably have the option to exclude yourself and officers from it. That option is often better left untaken, because you would be forced to shop for insurance separately. Worker's compensation protects from lost wages, medical costs, and the costs of rehabilitation, as well as liability in case of a lawsuit.

General liability:

This business insurance covers virtually any type of lawsuit you may encounter as a result of your business. Product liability coverage protects manufacturers, whereas errors and omissions coverage protects professionals and consultants for mistakes in their work. The minimum any business should consider is $1,000,000, and most should consider more.

Commercial auto insurance:

As a rule of thumb, if an automobile is used to conduct business, it needs commercial auto insurance. Whether an individual or a company owns a vehicle, it may need commercial auto insurance, so read your policy and consult with your agent before it becomes an issue.

Property:

Property business insurance covers loss to your building, inventory, and anything else "on the premises." We like "All Risk" coverage, which implies that it will cover loss from any type of incident; then we pay special attention to the exclusions. "Named peril" coverage we like less, since only the named incidents are covered. We also like policies that cover replacement value, not a depreciated "actual value," because we would want enough benefit to purchase a replacement and continue to our business.

Business interruption:

This coverage reimburses you for lost income while your business is down, say due to fire or some other situation. This is as important, because re-building a business could take months. Your deductible will be based in part on the number of days the business is closed.

Umbrella:

Business insurance meant to protect you beyond the limits of your other policies. Careful use of an umbrella policy, usually quite inexpensive, has enabled some businesses to save money by reducing the coverage in their commercial auto and general liability coverage.

Life insurance:

Beyond the personal life insurance you should have to provide for your family, business life insurance is necessary for two reasons. First, banks will require term life insurance equal to the value of any loans, made payable to the bank, before they will lend money. In limited partnerships where an agreement has been previously drafted to permit it, "Key person" insurance is used to buy-out the heirs of a recently deceased partner.

Disability insurance:

If you are a business owner, your company can purchase disability insurance on your behalf to provide income should you be unable to perform your job. "Business Overhead" disability insurance pays the basic overhead costs ranging from leases to salaries should the owner be unable to produce an income. For information on personal disability insurance, see the related article on this site.

Employment liability:

This coverage becomes increasingly important as the company grows and has more employees and managers. Employment liability insurance protects against lawsuits filed by employees as a result of treatment on the job. Discrimination and harassment lawsuits are covered.

Next Steps ...

For many, a Business Owner's Policy (BOP) package policy will help simplify business insurance decisions by bringing multiple policies together into one. If your company does not have more than a 100 employees, this type of business insurance makes it easier to insure your company completely; policies include liability and property coverage, as well as special additions for individual industries. Follow the links on this site for insurance estimates and information from some of the top insurers in the market.