What is business insurance?
Business insurance helps protect businesses from unforeseen circumstances that may happen during the usual course of business. There are several types of business insurance that can cover risks related to employees, property and legal liability.
The parts of an insurance policy
When you buy insurance, your premiums are pooled with other businesses. A portion of that pool of money helps businesses who suffer a loss such as those due to a fire, vehicle collision or business disruption. Payouts are made for the claims for those losses. By law, insurers must have enough money to pay for claims.
What you can make a claim for and how much might be paid out are contained in these 4 parts you’ll see in every insurance policy:
Declaration
This lists the risks covered by the policy, any limits to the insurance including deductibles. It also provides the premium amount, other parties who may have an interest in the policy (e.g., mortgage holders, lenders). It also lists any additions or changes to the policy.
Insuring agreements
This details the losses covered by the insurance, the subject matter of the insurance and the property covered. It lists circumstances when the insured may receive insurance proceeds. For an insurance claim to be valid, it must be covered under the insuring agreement and not be an exclusion.
Policy conditions
These are things the insured must do to maintain insurance coverage. If the insured fails to maintain a condition, the policy may be voided or the insurer may refuse a claim due to the breach of condition. It also lists statutory conditions the insured or insurer must comply with, and helps the insured understand how the law affects the policy.
Exclusions and special limits
This lists property and circumstances which are excluded from coverage. It details any other insured property which may be insured up to a special limit. The insured must understand any exclusions and limits, so they aren’t disappointed after a loss.
When you need business insurance
Limiting risks to your business is a wise strategy. The right business insurance can help keep your company thriving and your employees safe. Here are just a few situations where business insurance coverage could be crucial.
- Property insurance – A water pipe bursts in the apartment above your retail store, flooding your business below. A tornado damages the roof of your business.
- Key person insurance – Your sales manager becomes unable to work due to a critical illness. A valuable business partner dies unexpectedly.
- Liability insurance – A part fails in a product your company, resulting in a lawsuit from customers. You give the wrong professional advice to a client and it leads to a financial loss.
- Business interruption insurance – A vehicle accidently drives into your location causing structural damage and forcing your business to move until it can be repaired. Your technology business is a victim of a cyber attack taking you offline for days.
Steps to buying business insurance
- Assess your business risks. Every business is different, which means that the types of accidents, natural disasters or lawsuits that could harm your business will be unique.
- Contact knowledgeable advisors. Different advisors sell different types of insurance, so find ones that meet your business needs.
- Get multiple quotes. Business insurance prices and benefits can vary a lot. Compare rates, terms, and benefits for insurance from different advisors to get the best value.
- Re-assess annually. As your business becomes more successful, your liabilities may increase. If you’ve invested in or replaced equipment or expanded business operations, contact your insurance advisors to discuss these changes in your business and how they may change your coverage needs.