Companies can protect their assets by purchasing business insurance policies. These insurance policies transfers the financial loss caused by the insured to the insurance company. The insurer will indemnify the business up to the amount stated in the policy. Some of these policies can also help companies with their legal defense while in litigation.
Key Person Insurance
A key person insurance policy protects the business from financial loss or collapse if the key person, or someone who is vital to the success of the company, becomes disabled or dies. The policy is generally a life insurance plan taken out on the key person. Several examples of a key person include small business owners, partners of a company and CEO’s.
If the key person dies or becomes disabled the policy benefit is given to the company. The money can be used to train another employee to fill the vacant position, reimburse the company for losses suffered until the position is filled and also to buy out the key person’s interest in the company.
Professional Indemnity
Professional indemnity insurance protects businesses from being sued due to mistakes, errors, bad advice and recommendations that result in loss or damages suffered by another party. These plans pay the award amount won by or settled with the offended party up to the policy’s coverage limit. There are several types of professional indemnity insurance policies for businesses to buy including errors and omissions, malpractice and professional liability.
Professionals and businesses that purchase this type of insurance policy include doctors, lawyers, financial advisors, web designers and accountants. In some areas, businesses cannot operate unless they have a type of professional indemnity insurance plan. For example, Colorado requires all physicians to maintain a minimum amount of medical malpractice insurance to practice medicine in the state.
Commercial Auto Insurance
Businesses can protect their vehicles and their company by purchasing a commercial auto insurance policy. Commercial auto policies pay for damages caused by or to vehicles that are used to conduct business. These policies also pay for medical expenses of injured parties. Unlike personal auto insurance policies which only cover the accident, commercial auto plans can cover judgment awards if the injured party brings a lawsuit against the company. This plan can also cover accidents involving vendors and independent contractors who are conducting business on the behalf of the policyholder.
About Business Insurance
All of these policies except Key Person insurance pay for the policy owner’s legal fees while they are fighting claims. This is another benefit as court costs can cost businesses tens of thousands of dollars. It is also important that businesses have enough coverage to pay award amounts. Any judgment that exceeds the policy coverage limit will be the responsibility of the business to pay out of pocket.
How to Find the Best Small Business Insurance
There are various insurance policies available to cover different aspects of small businesses. Of course, when starting out, a small business owner does not want to burden himself or herself with excessive insurance costs.
Property Insurance
Property insurance insures the business against loss or damage to the location of the business and to its contents. The actual cash value at the time of loss or the replacement value of specified items will be paid out.
There are various options available, discuss these with the insurer or broker who will be able to help with specific small business needs. Always be very careful to read over and understand exclusions written into the insurance contract.
Liability Insurance for Small Businesses
Liability insurance protects the business against claims made against it for negligence on the part of the business or its employees.
Liability insurance is a third-party insurance, which means that it covers damages occurring to a third-party, and does not pay the company. It covers injuries to a third-party resulting from an employee’s or the company’s action or non-action (such as ensuring that the work environment is safe) This includes auto accidents involving business vehicles and injuries involving non-employees on the business property.
Commercial Auto Insurance
Vehicles bought for and used by the employees of the business are not covered by the business owner’s personal auto insurance policy. Commercial auto insurance insures against damage to vehicles and damage to others and can be customized to include auto liability, medical payments, comprehensive cover, collision cover, vehicles that are borrowed or rented, employees’ cars when used for business purposes.
Worker’s Compensation
Workman’s compensation insures the employees against on-the-job injuries. Under workers’ compensation, employers are required to make provisions sothat workers who are injured in accidents arising “out of or in the course of employment” receive medical treatment and receive payments ranging up to roughly two-thirds of their wages to replace lost income.There are numerous options for worker’s compensation, depending on the state.
Casualty Insurance
Simply put, casualty insurance covers damages to property and to people. Casualty insurance which includes personal liability can be useful for business owners and some insurers lump property and casualty insurance together. Combined policies of property and casualty are often the best purchase a business owner can make.
Business Interruption Insurance
This type of insurance covers loss or damage to cash flow and profit of a business. If a business is unable to operate because of being interrupted for some reason, such as damage to machinery, the insurance company will pay out for a certain time to cover losses.
Life and Disability Insurance
Life and disability insurance protects the business against the death or disability of key employees. For example, if a partner dies the proceeds of the policy can be used by the other partner to buy out his or her share of the business.
Using the services of a qualified broker may be a good way to negotiate the maze of small business insurance. He or she will have specialized knowledge, will be able to get better rates and will be able to help out with additional advice and as the business grows and insurance needs change.
