When you start a business, you are at risk. Lawsuits can come to you from the most unlikely sources. Therefore, you’re going to need insurance. Now, you might question. What are the small business insurance requirements? What are the different types of business insurance? It turns out, there are 17 types of business insurance that you might, or might not, need, but these are the Top Six business insurance types business owners should be familiar with:
1. Liability Insurance
There are also two flavours of liability insurance: public liability and product liability. Public liability insurance covers the insured in the case of legal action brought by members of the public. It covers accidents that happen on your business property and also those situations that result in the injury or death of someone off the site of your business because of your negligence. Product liability insurance is actually a form of indemnity insurance. Instead of advice and services, it covers the death, injury, or illness resulting from the use of one of your products.
2. Professional Indemnity Insurance
Professional indemnity insurance covers situations where someone files suit against you because he or she lost something, usually money, or became injured or killed after following your professional advice or using a service you provide. Such insurance should cover not only you personally, but also every one of your direct employees, contract employees, partners, or any other entity or person associated with your business who might give advice or provide services on your behalf.
3. Property Insurance
Property insurance encompasses several subcategories. Basically, such insurance covers things both at or associated with your place of business instead of people. Some things that might be insured include:
- Refrigerated items that spoil when the refrigeration unit fails
- Cash that is stored on your business’s premises
- Non-refrigerated items that are in transit to and from your place of business
- Glass, such as windows and partitions, at your place of business
- Theft, burglary, and fraud that occur at your place of business whether or not such acts are committed by your employees or outsiders
4. Business Interruption Insurance
Business interruption insurance covers situations where a business loses income through a lack of ability to operate after a natural disaster or other “act of God” of some sort. For example, if a cyclone wrecks your factory on the shore and shuts down production of your most important product for six months, business interruption insurance would cover, or partially cover, the losses you incur because of the cyclone-induced destruction. Such insurance would also cover the costs of acquiring and maintaining a temporary business location and other reasonable expenses.
5. Workers’ Compensation Insurance
Workers’ compensation insurance covers all of your employees against accidents or other incidents, including those that result in death, that occur while on the job site. Workers’ compensation insurance covers medical bills, lost wages because of the injury, death benefits, and other items associated with the incident in question, accidental or not. Each state or territory has its own specific rules, so it’s a capital idea to check them out.
6. Motor Vehicle Insurance
Motor vehicle insurance comes in two flavours: compulsory third-party and standard. Compulsory third-party insurance, which is also known as CTP, covers accident and injury claims made against you that are related to the use of a motor car or lorry of some kind while conducting business operations.
Unlike standard motor vehicle insurance, CTP, as its name implies, covers only third parties. For example, if you crash your delivery lorry into a parked car, CTP insurance will cover not only the owner of the car’s expenses for the repairs but also possible legal actions and fees brought against you.
As with workers’ compensation insurance, CTP has different requirements for each state or territory. Standard motor vehicle insurance covers the damages and injuries that you sustain personally while in the vehicle, such as repairing your delivery lorry in the previous example. While CTP would also cover any injuries sustained by the owner of the car you hit, standard motor vehicle insurance would cover your injuries.
How Much Does Business Insurance Cost?
Because of all the factors involved in purchasing the different types of business insurance offered, it’s not possible to say, “It will cost this.” There are many things to consider, such as:
- Type of business
- Location of business
- Size of business
- Claim history of the business
- Applicable risk factors
- Products or services provided or sold
- The nominated sum insured of the policy or policies
There are other things to consider, too, like the special requirements for home-based businesses or purely electronic firms with no brick-and-mortar location or locations. These requirements also vary by state or territory, so you should research what’s necessary for the place where you live and operate.