Type of Business Insurance Coverage

Business insurance does more than provide peace of mind and protection from loss or liability. The right types of business insurance support an overall operating strategy that helps you stay competitive, weather unforeseen accidents or events, and overcome catastrophes.

Paying business insurance premiums creates expense, though, and many companies choose to minimize their coverage, especially if those policies have not been needed for some time. However, since it only takes one natural disaster, one liability claim, or one employee accident to cripple a company, maintaining the right insurance coverage is absolutely critical.

Here are types of coverage you should consider:

• Property and liability. Property and liability coverage covers you from fire, flood, and other natural disasters, as well as judgments for accidents on your property or involving your employees while they are conducting company business. Every business should carry property and liability insurance.
• Health and medical. You may or may not choose to offer health benefits to employees. Most large companies offer some form of coverage to their employees. Whether you choose to do so depends on whether you can afford the expense and whether you believe it will help you recruit and retain the talent you need, among other considerations.
• Vehicle. Collision, comprehensive, and liability coverage for company vehicles.
• Business interruption. Business interruption insurance protects a business against losses that might result from temporary closings due to fire or other events or circumstances covered by the policy. Most business interruption insurance reimburses the company for lost profits (net profits) and ongoing expenses. Other policies may reimburse the cost of doing business at a different location if the original location can no longer be occupied and used for a certain period of time.
• Disability. Disability insurance pays all or a portion of an injured or incapacitated employee’s pay.
• Key executive life insurance. Some companies choose to insure key executives. Keep in mind the beneficiary of such policies is the company, not, for example, a family member of the executive insured. The goal of key executive insurance is to minimize the financial loss to the company if a key employee passes away and is, obviously, no longer able to serve the company.
• Director and officer. If your company has a board of directors or officers, this insurance covers them against liability if the business is sued. While a corporation, by definition, offers some level of personal protection against liability to employees and directors, some companies choose to provide additional protection to key members of the executive team.

Once you have policies in place, review them at least once a year to ensure your needs are still being met. Check whether existing policies should be modified and if you need to add new types of coverage.

• New products and services. If you have added new products or product lines, or have begun offering new types of services, make sure your liability insurance adequately protects you against claims in those areas. Additionally, if you have recently purchased new equipment, property, or real estate, ensure that your property coverage is up to date.
• Increased sales. If sales are up, business interruption coverage may need to be boosted. If higher sales result in the need to add employees, review your workers’ compensation coverage. Additionally, as your company expands, it may become more prudent to shield key executives and directors from liability and lawsuits.
• Additional vehicles.
• Theft or crime. Some policies may not cover loss due to employee theft, embezzlement, or fraud. Theft and crime insurance offers protection against such situations; as you add employees, the possibility of theft could increase.

How much insurance do you need? The answer depends on the size of your company, the nature of your business, and the potential for loss or liability. Talk to a business insurance agent – better yet, shop around and talk to several different agents – to get advice on the types of coverage you need and can afford.