Business insurance, also called commercial insurance, is a class of coverage that protects you, your organization, and your workers when the unexpected happens. From on-site accidents to natural disasters, lawsuits to data breaches, business insurance can mitigate the costs of catastrophe.
Do you need business insurance? Let’s take a look at what business insurance can cover:
Medical costs for injured employees.
Lost income for your business and your workers.
Legal fees and settlement costs incurred as a result of lawsuits against the company.
Repair and replacement costs for stolen or damaged property.
Recruiting and hiring in the event that a key person at the organization is no longer able to work.
When Does My Company Need Business Insurance?
Consider these situations where having some form of commercial insurance would be beneficial (or required) for your organization:
If you have employees, some form of workers’ compensation coverage may be required, depending on where you operate.
If your business uses vehicles, has inventory, or has property (owned or rented) – like an office full of computers and other equipment – that might be expensive to repair or replace.
If sensitive information of any type -- patient, customer, employee, etc. -- could be lost, leaked, or hacked and stolen from your business.
Does your business operate in an area that is dangerous or prone to fires, flooding, or other natural disasters? Certain types of commercial property insurance can also help alleviate the costs of repairing or replacing property damaged after a catastrophic event.
If the services you and your employees offer leave you open to potential legal action. Law, medicine, finance, architecture, and engineering are particularly vulnerable to malpractice lawsuits.
If there is a reasonable risk of a vendor, client, or other non-employee potentially being injured on your business property or by a product or service you offer.
If you’re planning on taking out a loan or selling your business.
What Does Business Insurance Typically Cover?
Coverage depends on the type of business insurance you're purchasing. Let’s review the most common ones and the protections they can afford you:
Workers’ compensation coverage may be required if you have employees. This type of commercial insurance covers your business if an employee is injured while working. It covers medical bills and lost wages in the event that an employee can’t return to work.
General liability insurance covers your business in the event of lawsuits from outside sources, like customers or vendors.
Professional liability insurance covers your business and employees if they are sued for perceived negligence in their role. Professional liability insurance is prevalent – and often required – for medical professionals, those practicing law, and engineers and architects.
Umbrella insurance covers lawsuit settlement fees that exceed the limits provided by other liability coverage.
Commercial property insurance helps you to repair and replace lost, stolen, or damaged commercial property, whether it’s your office space or the equipment you use day-to-day.
Commercial auto insurance covers the vehicles your company uses for business and any damage or accidents that may result from their use. It is required if your organization owns those vehicles.
Director / officer / key person insurance covers costs to your organization that come up if a person filling a key role at your company is no longer able to work.
Network security / cybersecurity / data breach coverage protects you if information stored digitally is lost, leaked, or stolen.
Your Questions Answered
Do I Need Business Insurance if I Have an LLC?
While a limited liability company (LLC) offers some protection to company owners, it protects only personal assets from debts, fines, and lawsuits. If you have employees or offer products and services that may be at risk, consider adding greater business coverage.
Does a Sole Proprietorship Need Business Insurance?
In a sole proprietorship, the owner is considered personally liable for all activities. Depending on your offered products or services, you will likely benefit from liability or property insurance. Low-risk digital offerings, like writing, don’t necessarily require insurance.
Does a Corporation Need Business Insurance?
Corporations should pay special attention to their specific needs and purchase policies that cover them appropriately.
How Much Does Business Insurance Cost on Average?
The annual cost of appropriate business insurance coverage will vary wildly depending on where and how your business operates, what services or products it offers, and the size of your business. According to Forbes, on average, a small business can expect to spend between $350 and $4,000 a year on insurance costs. Larger businesses or businesses in industries that have more risks to consider, like the oil industry, can expect to pay millions annually for coverage.
How Can I Find the Right Business Insurance?
Like any other type of insurance, there’s no one-size-fits-all policy. Do your research and shop around to find policies that best serve your organization. The U.S. Small Business Administration outlines four steps to acquire commercial insurance:
Assess your needs. What risks does your business face? Might you be particularly vulnerable to lawsuits, natural disasters, or on-site accidents? Your first step is to identify the types of coverage you need. An agent or broker may be able to guide you toward coverage that makes sense for your business if you aren’t sure where to start!
Get in touch with a reputable agent or broker, like Bennie. Request quotes for the coverage that you need, and if it’s within your organization’s means, consider working with multiple licensed agents to get a good variety.
Thoroughly compare your options. You’re not just considering price when you review quotes and offers. Take into account what is included and excluded from a benefit, and ensure that your needs are met before you commit.
Review your coverage and needs annually. Whether you’re preparing for growth or trying to mitigate cost in a tight market, your business needs change all the time. Insurance coverage should always be reviewed and adjusted to keep up with your needs.