Business insurance: Meaning, types, and how it works
Just as individuals, businesses are often exposed to risks that could cut their life span short. Because of this, there are insurance plans for businesses that protect them from losses that can lead to business foreclosure.
What is Business Insurance?
Business insurance is a class of insurance that provides coverage for business from losses due to happenings that may occur during regular business operations. There are several types of insurance for businesses which may include coverage for property damage, risks related to employees and legal liability.
The demand for insurance by companies is set on the potential risks they are likely to face. These risks differ depending on the kind of environment in which the business operates.
Types of Business Insurance
Several types of business insurance meet the various needs of business owners. They are listed below
- Professional Liability Insurance
- Property Insurance
- Product Liability insurance
- Vehicle insurance
- Business Interruption insurance
- Workers’ Compensation Insurance
- Professional liability insurance.
Professional liability insurance could also be known as errors and omissions insurance. It covers a business against negligence claims due to harm that results from mistakes or from business operations.
- Property Insurance
Whether a business owns or rents its properties, property insurance is necessary. This kind of insurance covers equipment, inventory, furniture and fittings in the event of a fire, storm or theft. However, natural disasters like floods and earthquakes are usually not covered under a standard property insurance policy.
- Workers’ compensation insurance.
Even if you have just one person working for you, workers’ compensation insurance becomes necessary for business insurance policies. This will cover medical expenses, temporary disability and death benefit if an employee is injured or dies while working for the business.
- Product liability insurance.
If you are into the business of manufacturing products for sale in the market, product liability insurance is a must. This is to ensure that the company is duly protected over any lawsuit arising from using their product. The product liability insurance works to protect a business in such cases with this type of coverage.
- Vehicle insurance.
Company vehicles should be fully insured to protect the business against liability from an accident. At least, a business should insure its vehicles against third-party claims. However, it is advised that opting for comprehensive car insurance is better. It will cover the car in an accident and any third-party claims that may have arisen from the accident.
- Business interruption insurance.
If a disaster or pandemic event occurs, the business’s operations will most likely be interrupted. In this period, your business will suffer a loss of income due to workers’ inability to work for the company. This type of insurance is mostly applicable to businesses that require a physical location. Business interruption insurance compensates a business for income loss during these events.
Why You Should Have Business Insurance
It’s essential to have business insurance in place to protect the business from a potential mishap that could wipe out the assets of small scale business. Insurance provides protection for your business against any harm that could come to your customers or neighbours as a result of your product.
In addition to protecting yourself, business insurance also helps you protect others. If you own a restaurant and a customer becomes sick after taking one of your products. You will need business insurance to pay for the damage you’ve caused.
Business insurance can also be a requirement for certain types of business activities. Some contracts make it mandatory in their terms that you be insured, and some class of insurance, like workman’s compensation, requires all companies to have a business in most countries.