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7 types of insurance every business owner needs


Real business success requires a heady combination of taking risks in some areas and mitigating or eliminating other risks.

A business leader can’t eliminate all risks, but insurance can provide some cover should the sky begin to fall. Despite this, insurance is an area where owners often try to skimp on the type of insurance they pay for or the amount of coverage they choose.

How can you ensure your company has the insurance coverage it needs to survive a significant natural disaster, employee or customer injury or product failure? Make sure your company has the right mix of the seven most essential types of business insurance.

Workers’ compensation

Workers’ compensation insurance provides injured employees with replacement income and pays for medical expenses if they are injured on the job. In exchange for these benefits, employees give up the right to sue the employer over their work-related injury, regardless of who was at fault.

All states except Texas require businesses to carry workers’ comp. Depending on the state, significant penalties may apply for a failure to keep this insurance current.

How it can help you: Workers’ compensation insurance protects your workers by ensuring that they receive suitable medical treatment and are compensated for a workplace injury. It also provides legal protection for business owners, including protection from employee injury lawsuits.

Professional liability

Sometimes referred to as errors and omissions (E&O) insurance, professional liability insurance is a must for business owners who work directly with customers offering services or advice. Professional liability protects your business from claims of negligence, failure to perform or improperly providing services.

For example, a financial planner may be accused of giving a client advice that results in thousands of dollars in losses. Or, a web developer could write code that fails to withstand heavy traffic and results in lost sales.

How it can help you: E&O or professional liability insurance will help cover the cost of damages associated with an allegation of losses due to your negligence or errors.

Property insurance 

Business property insurance will cover the cost to repair or rebuild your company’s physical structures if you sustain damage from fire, hail, theft, wind, smoke or vandalism. This insurance generally covers buildings, not other types of “property” such as vehicles in a commercial fleet. Vehicles are covered under a commercial vehicle policy.

Property insurance sometimes includes a “business interruption” add-on, which will reimburse you for lost income related to property damage. For instance, if your auto repair shop is damaged in a fire and only half the bays are in working condition, property insurance with a business interruption rider would pay to repair your building and reimburse you for income lost while you operate at half your normal capacity.

How it can help you: The costs to repair or replace damaged business property and assets can quickly overwhelm a company. A business property policy with adequate coverage levels can help shield your operations from unexpected events. Plus, additional business interruption coverage can protect your earnings if you have to temporarily shut down or operate below your usual capacity after an incident, such as a fire or natural disaster.

General liability

General liability insurance helps protect your company if someone experiences bodily injury, property damage or other types of injury as a result of your business operations.

Common examples include if someone slips and falls in your store or if you damage a customer’s property while working on their premises. In both cases, repairs and medical bills can be costly.

How it can help you: General liability generally covers legal costs and settlement payments or judgments that are awarded to the injured party. However, what general liability insurance covers varies greatly from state to state. The amount the insurer will pay also depends on the scope of coverage and maximum amount stated in the policy. Since lawsuits are often more expensive than the cap in a general insurance policy, many business owners take out additional umbrella policies to cover additional costs.

Business owner’s insurance

A business owner’s policy, or BOP, combines the most common types of property and liability insurance a business owner needs into one convenient, comprehensive package at a competitive rate.

BOP insurance is generally purchased by small businesses. Mid-market and larger businesses with more complex insurance needs generally buy separate policies for each type of insurance.

How it can help you: BOP protects your company from a wide variety of damage, from customer falls to property damage.  Because the insurance is bundled, a business owner’s policy is often less expensive than if individual coverage was purchased separately.

Data breach/cyber breach liability

Data or cyber breach liability insurance protects your business in the event that you are sued, penalized or lose business due to a cyber attack or hack. Personally identifiable customer information includes credit card numbers, Social Security numbers, addresses, medical details, phone numbers and personal information such as birthdays and the names of family members.

How it can help you: If your business handles or stores any personal information about a customer, you probably need data/cyber breach liability insurance. It can provide the funds for you to react quickly to restore customer confidence and mitigate further damage. Some insurance companies include consulting services to help you put software and systems in place to avoid such attacks in the first place.

Key person life insurance

Does your business success depend on one, or a few, key employees? If the answer is yes, you need a key person life insurance policy to protect your company from the loss of those individuals.

For example, you’ve got a chemist working on a game-changing compound that will make your company $5 million in the first year on the market. But that chemical compound is still under development. A key person policy will protect your company from loss should your chemist die unexpectedly before the product launched.

How it can help you: Often, particular individuals are essential to the success of a business. In such instances, the loss of the CEO or other top talent could result in the demise of the company. Key person insurance gives your company the resources it needs to regroup after a critical employee’s premature death.

A PEO can help you manage your business more effectively with the right combination of property, liability and employee health insurance. Learn how by downloading our free e-book, HR outsourcing: A step-by-step guide to Professional Employer Organizations (PEOs).