There are many risks associated with running a business. From employee injury to a natural disaster destroying your business property to a client lawsuit, these risks need to be taken care of. Business insurance covers these risks and protects your business assets, including your personal assets. Here are 10 reasons every business should have insurance. The SBA also lists the types of insurance every business must have. To protect your business, read on to learn more.
General liability
While most businesses have many different types of insurance policies, the general liability policy is one of the most important. General liability protects a business against lawsuits and other legal issues. If a customer gets hurt in your business, it may be your responsibility to pay medical costs. It will also cover damage to property and completed operations. Some states do not require general liability insurance for low-risk businesses like freelance writers, but it is highly recommended for all businesses.
When considering the type of insurance for your business, it is important to understand that general liability insurance does not cover deliberate acts, such as breaking the law. In cases such as these, an umbrella policy is a smart decision to make. The policy will cover legal fees and settlement payments that you may incur as a result of a lawsuit, and can even protect your commercial buildings. In addition, many insurance policies have add-ons like cyber insurance.
Property insurance
Regardless of the size of your business, every business needs property insurance. There are two basic types of property insurance policies: all-risk and peril-specific. All-risk policies cover losses due to various incidents or perils, such as fire, theft, flood, and crime. Peril-specific policies are more specialized, and are purchased when specific risks are more common in a given area. However, both types of policies are essential for any business.
Property insurance protects your building, office furnishings, inventory, computers, and signage. It also pays for medical bills in the case of an injury caused by a covered event. You can also purchase a rider for high-value personal property. Property insurance will pay you the actual cash value of damaged or stolen property, as well as its replacement cost. This insurance is critical to a business’s ongoing operations and should be considered before you purchase it.
Product liability
A defective product can cause severe injury or death. In these cases, product liability insurance provides protection for any party involved in the manufacturing or design of the product. Even the most minor of mistakes can result in a lawsuit against a company. While manufacturers are the most likely to face claims, any party involved in the manufacturing or design process can be held liable. In addition to manufacturers, other parties involved in the production process, including distributors, should be covered as well.
Regardless of industry, every business should have product liability insurance. It is especially important for companies selling tangible products. These companies are exposed to third-party lawsuits, which can claim injury or property damages. For example, in the 1990s, the McDonald’s “Hot Coffee” lawsuit made headlines. Product liability insurance will cover any settlements and defense fees in such cases. A business can also opt for a liability policy if it sells products for personal use.
Key person insurance
Even a small business may require key person insurance. If one or two people are crucial to the financial success of the business, the loss of these people can impact employee morale and the bottom line. In addition, the loss of a key employee may leave the company in debt and unable to find a replacement. That’s why it’s crucial to protect your key people with key person insurance. But how do you find the right policy?
There’s no one formula for determining the right amount of key person insurance. What you want to consider is what the cost would be to replace the key person, how much they contribute to the company’s bottom line, and their current salary. Then, multiply the salary by five or seven to get a ballpark figure. Once you have the number, you can choose between permanent and term policies. But don’t let the low cost fool you; it’s important to consider all the financial effects of losing a key employee.
