As a Small Business Owner, What Insurance Do I Need?

When you own a business, you have a lot to protect, and the right insurance coverage can be important to your continued success. Luckily, there are a variety of coverages to choose from when it comes to protecting your business.

A small business woman takes an inventory of her insurance needs.

But, do you know what types of business insurance coverage are out there? And, which of those coverages could help protect your particular business?

Here's a rundown of the things to consider when it comes to buying your business insurance policy.

Property Coverage

Perhaps the most obvious reason to purchase business insurance is to protect your tangible investment—from your merchandise to the tools you use to make your business work. What would you do if, for example, a fire destroyed your place of business, making your equipment unusable and your products unsellable?

The property coverage in a business insurance policy can help protect the physical property of your business against certain causes (they vary and are specified in your policy). This coverage may protect the actual building in which your business is housed, as well as inventory, equipment, furnishings and other property you have there. According to the Insurance Information Institute (III), it may also cover other costs, such as equipment breakdowns or the cost of removing debris after a covered loss.

Liability Coverage

No matter how careful you are, you may find yourself in a variety of situations that could result in a lawsuit against your business, so it's a good idea to be prepared—just in case. The U.S. Small Business Administration (SBA) outlines three types of business liability coverage:

General liability coverage: This type of coverage protects you in case you are sued because of accidents, injuries or claims of negligence. For example, if someone is injured on the premises of your business and files a lawsuit against you, this type of coverage may (depending on the situation) help cover some of the related costs.

Product liability coverage: If your company manufactures or sells a product, this type of coverage may come in handy. It protects you in case your product is defective and causes injury or damage.

Professional liability coverage: Businesses that provide services often purchase this type of coverage, which protects against errors and negligence. One example, according to the SBA, is the malpractice insurance that doctors are required to carry.

Coverage Relating to Employees

Depending on the number of employees you have, as well as other factors, there may be additional insurance considerations. Employment practices liability coverage, for example, helps protect you in case a former employee files a groundless claim against your company.

Also, according to the III, all states except Texas require businesses with a certain minimum number of employees (at least three to five, depending on the state) to have workers compensation coverage, which may help protect them in the event that an employee is injured on the job.

Coverage for Business Vehicles

Just like your personal car, your business' vehicle needs to be protected. Business auto coverage is available to help protect your company against liability arising from accidents in your company's vehicle, as well as other features, depending on the policy.

Data Compromise Coverage

Data compromise coverage, or data breach coverage, is another way to protect your business. This type of coverage helps protect against any associated legal or other costs in the event that personal data of employees or customers is stolen or accidentally released by your company.

Other Considerations

As you shop for a business insurance policy, there are many things to think about.

If you run your business from home, for example, your homeowners insurance policy typically offers limited or no coverage for business-related property, such as supplies, tools or customers' items stored for repair, or for business-related liability. So, it may be a good idea to consider purchasing a business insurance policy.

In addition to the coverages described above, there may be even more business insurance options to consider. A conversation with your business insurance agent can help you determine the best way to protect your company.

Related Resources:

Coverage subject to terms, conditions, and availability. Policy issuance is subject to qualifications. Allstate Insurance Company, Allstate Indemnity Company, Allstate Fire and Casualty Insurance Company, Allstate Property and Casualty Insurance Company, Northbrook, IL. © 2013 Allstate Insurance Company, Northbrook, IL.

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