Understanding the Different Types of Business Insurance

HomeBusinessUnderstanding the Different Types of Business Insurance

Depending on your industry, there are different types of business insurance policies. They offer protection against accidents, natural disasters, lawsuits, and other unexpected risks that could financially devastate a company.

Generally, every business needs general liability and commercial property insurance. These are often packaged together in a policy called a business owner’s policy (BOP). Some businesses may need additional specialized coverage.

Business Owner’s Policy (BOP)

A business owner’s policy combines general liability and commercial property insurance into a single policy. It is designed for low-risk small and medium-sized businesses. The BOP typically includes a few other types of coverage, such as business interruption insurance. This type of coverage reimburses a business for lost income caused by a covered event that shuts down operations.

Office-based businesses (like law firms and real estate agencies), retail businesses, restaurants and cafes, and other small businesses may qualify for a BOP. However, some businesses are better suited for different types of coverage, like professional liability insurance or errors and omissions (E&O) insurance. Having these extra policies available allows you to customize your business insurance package. It also eliminates the need to buy multiple standalone policies, saving money on your premium. However, bundling coverage can increase prices as the number of included coverages increases. That’s why it is essential to understand your business risk before choosing a package.

General Liability

Commercial general liability insurance protects you against the financial consequences of typical company mishaps. Almost all businesses need this type of protection.

For example, if someone slips and falls in your office or damages property that doesn’t belong to you, this policy can pay for the repair or replacement costs. It also covers accusations of reputational harm, such as libel, slander, and copyright infringement.

Often, your landlord will require this type of coverage before you can rent space in their building. You can purchase it as a standalone policy or combine it with other policies, such as the Business Owner’s Policy, to create a package that meets your needs and risks.

Many insurers, like Mountain Insurance, offer these policies under various names. Ask your provider to explain the different options and benefits so you can decide which one is right for your business. 

Commercial Auto

Businesses need safe and reliable vehicles, whether delivering goods, meeting clients, or driving to work sites. Commercial auto insurance provides liability and physical damage coverage for automobiles, trucks, vans, and other specialty vehicles owned, leased, or rented by your company.

Like standard car insurance, most commercial auto policies provide collision and comprehensive coverage for business-owned vehicles. But they also often include hired and non-owned auto coverage, which extends the policy’s limits to cover incidents when employees drive personal vehicles on company business or when the business rents a vehicle.

Delivery drivers, for example, must carry their car insurance policy. However, a commercial policy might include hired and non-owned auto coverage to protect the business in cases where those drivers are responsible for an accident while making deliveries. This type of coverage provides car rental reimbursement and new vehicle replacement coverage. Typically, this coverage is packaged with other business insurance solutions such as general liability or workers’ compensation.

Workers’ Compensation

State law often requires Workers’ compensation insurance to pay for medical bills and missed income for employees who incur work-related injuries or illnesses. This coverage is separate from general liability and typically requires a genuine employer-employee relationship. Coverage also naturally extends to certain “occupational diseases” such as asbestosis or other conditions caused by years of workplace exposure.

The rules governing workers’ comp are complex and vary by state. In some cases, high-risk employers cannot secure insurance through the private market and may only be able to obtain coverage through a state-approved insurance pool or assigned risk plan. In this case, the premium is often much higher. However, a workers’ comp policy does not protect a business from third-party claims. For this, a business should consider commercial property insurance. It also does not cover the business from damage to its property. For this, a business should view a general liability or owner’s policy.


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