Types of Business Insurance: A Complete Guide

Unexpected events can have devastating impacts on any business, from natural disasters and data breaches to lawsuits and even the threat of bankruptcy. Business insurance offers protection from these risks.

Paychex licensed agents can assist your business in assessing its needs and selecting appropriate policies, including commercial property, general liability, workers’ compensation, and commercial auto.

1. Business Owner’s Policy (BOP)

A business owner’s policy (BOP) combines general liability and commercial property insurance to safeguard small businesses against unexpected liabilities such as customer bodily injury or damage to company property. BOPs typically provide coverage limits of up to $1 million per claim and $2 million total.

Eligibility for a BOP depends on several criteria related to your property and revenue, such as location and classification of its structure and revenue stream. Insurance providers may have specific underwriting guidelines for accepting certain industries into their BOP policies.

Companies located in areas prone to high crime or natural disasters might require higher premiums. An experienced insurance broker can assist in understanding your risks, and whether a BOP or commercial package policy would provide the ideal coverage.

2. General Liability

General liability coverage is an essential element of any comprehensive business protection plan. Also referred to as Commercial General Liability (CGL), this coverage shields your organization against claims of bodily injury and property damage from third-party claims that could arise as a result of its services, whether from slip and fall incidents in retail stores or damages from landscaping services that damage client sculptures outdoors – providing legal costs, settlements, and judgments without jeopardizing financial stability.

However, for your coverage to kick in a client or company can provide verifiable proof that negligence caused damages. Therefore, your coverage limits must be determined by a professional.

3. Commercial Auto

If your business transports passengers via Uber or Lyft vehicles operates taxi services, or operates taxi fleets, a commercial auto policy is an essential piece of coverage that provides liability and physical damage coverage for cars, trucks, or vans owned by your organization.

Your auto policy should provide coverage for both vehicles leased or rented by your business and personal autos used by employees for business. If employees use their cars for work purposes, most policies offer hired and non-owned car coverage (or an endorsement policy) to cover these instances. It’s also essential to remember the federal regulations concerning safety equipment when considering this coverage.

4. Business Interruption

Business interruption insurance helps cover lost revenues when your operations must close due to direct physical damage and also reimburses some operating expenses.

Policy terms vary by insurer and policy but typically lost income and extra expense reimbursement begins within 24-48 hours (or once your dollar-based deductible has been met).

Coverage includes the documentation of profit loss and operating expenses such as rent, mortgage payments, taxes, payroll payments, loan payments, and even costs associated with moving your company temporarily to a different location.

5. Employee Dishonesty

This type of policy offers companies financial protection in case employees embezzle funds or engage in other illegal activities that negatively affect the balance sheet of the business. It can also cover losses related to forgery and property theft. Typically it comes included with crime insurance packages or is offered as an add-on option when purchasing business owner policies.

Employee dishonesty coverage can be considered similar to fidelity bonds. Fidelity bonds are legally mandated for employees handling company funds or financial records, while businesses that send employees into clients’ homes (such as landscapers, housekeepers, and pet sitters) should consider procuring one as well.

6. Business Crime

Business crime insurance (also referred to as commercial crime) protects businesses against losses caused by theft. This coverage typically extends to employee dishonesty, forgery or alteration, money loss due to theft, property loss by theft, and burglary/robbery – in other words – employee dishonesty! Depending on your needs it can either be included as part of a package policy or sold individually.

Theft can be an ongoing risk for businesses of all sizes and industries, leading to significant financial losses that threaten company operations. Business crime coverage protects from this threat while fulfilling legal or contractual requirements – for instance, a bookkeeper might fall prey to a fraudulent email that wires you funds fraudulently.

7. Business Owner’s Policy (BOP) Add-Ons

Contrasting with general liability policies that provide coverage separately, Business Owner’s Policies (BOPs) offer multiple forms of coverage combined into one convenient bundle – often at less cost than purchasing individual policies separately.

A business owner policy (BOP) generally includes commercial property insurance, business interruption insurance, and general liability policies. The former protects your business against risks like customer injury or property damage while the latter helps compensate it for losses caused by events that temporarily halt operations. You may also wish to add other policies like employment practices liability or cyber liability protection to address specific exposures.

8. Business Owner’s Policy (BOP) Excess

A Business Owner’s Policy (BOP) combines general liability and business property coverage into one package policy. Ideally suited for small businesses, BOPs usually cost less than buying both policies separately. Additional policies may need to be purchased to address specific risks such as data breaches or cyber liability.

The cost of Business Owner’s Policies (BOPs) varies based on factors including the value and type of property insured as well as industry risks such as fire and theft. Coverage limits also play a part, with higher limit options costing more. Flood and earthquake coverage generally requires additional policies or endorsements.

9. Business Crime Add-Ons

Business insurance provides essential protection against unexpected financial losses that could wreak havoc on any company, yet can often be an intricate subject with multiple aspects and policies to take into account.

Employers’ liability and public liability coverages are legally mandated for most businesses. Other forms, like cyber risk insurance or fidelity bond coverages, can help businesses that enter contractual agreements with customers. Errors and omissions or professional indemnity coverage are designed to safeguard businesses against specific risks tailored to specific industries and locations – not to mention that they provide added stability when appearing before investors and clients.

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