Business insurance policies combine liability and property into one single coverage. These plans help to cover your business for things like theft, fire, and other damages. You'll also be covered against claims for property damage, bodily injury, advertising injury, and personal injury.

Basically, business insurance policies cover a lot of different things but not everything, so it's helpful to know exactly what kind of protection you're getting. This handy guide will go over the key components of your business policy so that you can understand the coverage you're getting (to learn more about your personal insurance coverage, see Back to the Basics: The Key Components of Your Insurance Policy).

Do You Need a Business Insurance Policy?

Business insurance policies are created to cover any problems that arise from how you run your business. But before you run off getting coverage, let's make sure you need a business insurance policy in the first place. These plans are useful for:

  • Any company that has a physical location, even if it is run out of your home
  • Any company runs the risk of being sued, perhaps by a customer who gets injured at your place of business (learn more in Insurance and Lawsuits: What Happens When You Are Sued)
  • Any business that owns assets that could be damaged, broken, or stolen, even if they're digital assets (customer data counts)

The Benefit of a Business Insurance Policy

Owners of companies small and large purchase business insurance policies because it's the smart thing to do and it's convenient.

These policies simplify coverage options for businesses, especially small to mid-sized companies. They also save business owners money by combining a variety of coverages into a single plan. And while the base business coverage is important, companies can also add additional coverage to the policy to further guard their assets and the business itself.

What Does Your Business Insurance Policy Generally Cover?

It's time to get back to the basics. So, let's dive in and see exactly what a typical business insurance policy offers.

Here are the three main coverage options included:

  • Commercial Property: Any property that you own, lease, or rent will be covered with one of these policies. This includes buildings, equipment, and more (see Business Insurance: Building, Contents, and Stock to get more details). The plan also offers protection against loss of accounts receivable and records.
  • General Liability: Your business needs broad scope liability protection. You can get sued if you cause harm to a person or damage property. Liability coverage can come in handy even if you're diligent and upstanding. Businesses get sued even when they've done everything correctly, and your liability protection will cover costs if you have to go to court.
  • Business Income: If your business has to suspend operations as a result of a covered loss, then your business insurance policy will replace the lost income to ensure you meet continuing obligations like compensating employees or paying rent.

Other Coverage Options

While a standard business insurance policy includes the three coverage options above, there are additional one you can add to your plan.

Common add-on coverage options include:

Errors and Omissions Coverage

Businesses face a lot of risk when conducting their daily operations . If you're a professional, your judgment and ability is on the line with every single job. It doesn't matter whether you did something right or wrong, your company can be sued by customers claiming negligence at any time.

If you commit a negligent act, an omission, or make an error, errors and omissions coverage will offer your business the protection required to keep your operations going. Certain businesses, however, may not be eligible for this coverage.

Data Breach Coverage

Nearly every company is at risk of a data breach these days. If your company handles or stores any information from customers, employees, or patients, then you're at risk.

When sensitive information is stolen or lost, you must act quickly to minimize losses and restore confidence in your company. You have to contact those affected by the stolen information, use credit monitoring services, deal with public relations, and so much more. It can truly be a disaster.

Data breach coverage was designed to get your company back on track after someone hacks your data, but it will also help cover your business if you end up in court due to a breach (see An Introduction to Cyber Insurance for Businesses to learn more).

Here's a little more information about data breach coverage:

  • It will replace any income loss and pay for additional expense required to keep your company afloat. This can be especially handy if your business needs to close for a short while or slow down its operations due to a breach.
  • Hackers are not known for their kindness these days. Many companies are forced to pay extortion or ransom payments under threat of a breach. Your data breach coverage should cover this expense.
  • Some policies also covered past data breaches. If your business had data stolen from it before the policy was effective, many would still cover your company when the issue comes to a head.

Other Considerations

There's a lot more to consider when talking companies and insurance. Business insurance policies are just the tip of the iceberg. Business owners still need to think about other things, like:

Employee Insurance

If you have employees, then your company will need a workers' compensation policy. Workers' compensation pays for an employee's medical costs if they are hurt on the job. It also replaces their income during the time they cannot work.

This insurance is exceptionally important and must be purchased separately from a business insurance policy. It's also mandatory in nearly every state (see An Intro to Workers' Compensation to learn more).

Vehicles

Businesses that rent, lease, or own vehicles will need commercial auto insurance. Again, this coverage is not optional. You need to protect your company from huge financial losses resulting from time on the road during business hours (find out whether your car is still a personal passenger car if you sometimes use it for work).

Back to the Basics

If we're talking about the basics, every business owner should have a business insurance policy. Many states won't allow you to operate without it, as it can keep your business afloat if disaster strikes.

Don't risk having all your hard work go to waste just because you didn't get the right policy. Speak to a professional insurance agent today and ask them how business insurance coverage can benefit your company.