Insurance Library

Small Business > Basics

Three types of small business insurance exist to cover the most common risks, one of which is required. Business property and liability insurance are not optional under any circumstances, but you’re not legally required to have them, whereas you must provide coverage for job-related injuries and illnesses through workers’ compensation insurance.

Property Insurance

Property insurance will usually cover any losses you incur in case of a fire or lighting strike. A standard small business property insurance policy will also include coverage from windstorm, hail, explosion, riot and civil commotion, and damage caused by aircraft, cars, or vandalism.

The insurance can be bought based on the property’s actual value (replacement cost minus depreciation), replacement value, or some agreed-upon amount (used for art and other unique items).

Policies are also distinguishable based on which items they cover. Make sure any of the following items applying to you are covered:

• Buildings and other structures, leased or owned
• Furniture, equipment, and supplies
• Leased equipment
• Inventory
• Money and securities
• Records of accounts receivable
• Improvements and betterments you made to the premises
• Machinery
• Boilers
• Data processing equipment and media, including computers
• Valuable papers, books, and documents
• Mobile property, such as automobiles, trucks, and construction equipment
• Satellite dishes
• Signs, fences, and other outdoor property not attached to a building
• Intangible property (goodwill, trademarks, etc.)

Make sure your items are fully insured and check the terms of reimbursement. Even if you have a $1 million policy, it doesn’t mean that the whole amount will be applied to a specific type of property.

Liability Insurance

Liability coverage will protect your business in case you are sued. You company could be sued for something it did, or didn’t do, which resulted in an injury to someone else. It will cover the cost of the damage done and the legal fees paid to defend your company in the lawsuit. Legal fees for a defense can be substantial.

This insurance does have limitations when it comes to wrongful termination, sexual harassment, or race and gender lawsuits. You will not be covered for these cases.

Business Owners Policies

Many policies bundle together property and liability insurance into a common business owners policy (BOP). It can provide broad coverage at an affordable rate.

Even with one of these policies, you may want to consider adding coverage that isn’t included. Each business has different requirements and yours may need custom tailored insurance.