What Is Business Insurance? A Comprehensive Review

Consider the size of your business irrelevant when contemplating business insurance. No business, regardless of its scale, is immune to the potential impact of natural disasters, theft, or legal actions.

Statistics reveal that each year, one out of every three small businesses faces an incident that could have been mitigated with insurance coverage.

Without such protection, the responsibility falls squarely on the business owner to bear the financial burden of significant damages, jeopardizing both the future of the business and the owner’s livelihood.

Business insurance serves as a safeguard against an array of risks. However, navigating through the myriad options and providers to select the right coverage can be daunting.

This guide is designed to assist you in understanding the most common types of business insurance, finding reputable providers, and navigating the process of filing insurance claims.

What is business insurance
Business insurance, or commercial insurance, shields businesses from losses resulting from unforeseen events during regular operations: Photo source (NerdWallet)

What is business insurance?

Business insurance protects your business’ financial, intellectual, and physical assets in the event of a natural disaster, lawsuit, theft, injury, or loss of income.

It’s a form of risk management for your business that provides financial protection when you need it. 

What kind of business insurance do I need?

Different types of business insurance protect your business in different ways. Let’s take a look at the most common types of business insurance coverage.

General liability insurance

General liability insurance, essential for all businesses, provides coverage for legal disputes with third parties, encompassing bodily injury, property damage, defamation, defective product damage, and copyright infringement.

It covers costs for property damage during work, protects against libel and slander claims, and includes medical expenses and lost wages for non-employees injured on your premises.

However, it doesn’t cover negligence or damage to business-owned property, requiring a separate policy for that.

Commercial property insurance

Regardless of ownership or location, every business should have commercial property insurance.

This coverage safeguards physical assets from financial loss caused by theft, vandalism, or natural disasters.

It assists in covering repair or replacement costs, allowing uninterrupted business operations.

It’s essential to recognize that certain natural disasters, such as floods or earthquakes, may require additional policy coverage.

Business owners policy

Your insurance company may bundle general liability insurance with commercial property insurance at a discounted rate.

This is called a “business owners policy” or BOP. A BOP is beneficial for any business that has equipment or inventory or operates a brick-and-mortar location. 

Professional liability insurance

Professional liability insurance, also known as errors and omissions insurance, shields against claims arising from professional service errors or omissions.

It covers costs for defending against accusations of negligence in service provision, including legal fees and settlements.

For instance, if a marketing consultant faces a lawsuit due to a client’s declining sales after implementing recommendations, the insurance can cover defense and settlement expenses, even if the claim is ultimately deemed meritless.

Also read: How much is insurance for mobile detailing business

Product liability insurance

For businesses involved in making, distributing, or selling products, product liability insurance is crucial.

It addresses risks linked to production or design flaws, inadequate labels, warnings, and instructions.

While general liability insurance may provide some coverage, businesses in product-related sectors may require additional protection.

This insurance assists in covering costs related to injury or property damage claims, encompassing legal fees, settlements, and medical bills.

Notably, it doesn’t cover recall expenses, inventory losses, or employee injuries.

Other kinds of insurance coverage

In addition to basic liability and property coverage, there are a few other business insurance products you might need:

  • Cyber liability insurance is a must if you have a website, accept credit cards, or store customer information. It protects your business against the costs related to a data breach or ransomware attack.
  • Workers compensation insurance is required in nearly every state if you have employees. Workers comp pays for medical costs and wages for work-related illnesses or injuries.
  • Commercial auto insurance protects you if an employee has an accident in a company vehicle. If you make deliveries to customers or work at client job sites, you may need this coverage. 
  • Home-based business insurance enhances your homeowner’s insurance policy to cover general and professional liability risks, and the potential for loss of business income if the home office is damaged. 
  • Business interruption insurance covers financial losses incurred while your facilities are closed. This policy can pay for a temporary business location so you can continue operating. 
  • Umbrella insurance is extra insurance that provides protection beyond the coverages of existing policies. It covers losses not covered by your other policies. 

You might need additional coverage depending on the type of business you have.

How do I buy small business insurance?

QuickBooks Insurance simplifies business coverage for its customers, offering tailored policies for precise needs.

Obtain a free quote, start coverage on the same day, and trust the brand that supports you.

For others, choosing business insurance involves selecting a policy and provider.

Options include working with a commission-based broker specializing in your industry, using online marketplaces for DIY comparison, or contacting a preferred provider directly.

After choosing, purchasing a policy is straightforward with online portals for payments, claims, and document requests.

Regularly reassess your coverage to ensure it aligns with changes in your business operations.

7 tips for handling small business insurance claims

Whatever’s gone wrong, there’s a right way to handle business insurance claims.

A misstep during the claims process could result in your claim being delayed or denied altogether.

Use these tips to determine when you need to contact your insurance provider and file your claims quickly. 

Seven Tips For Handling Small Business Insurance Claims

1. Stop further damage

After damage to your business property, act swiftly to prevent further harm.

For fire or falling trees, promptly cover openings to shield against rain or debris.

In the case of flooding, use a pump and relocate undamaged items.

If theft occurs, secure the premises and contact the police immediately.

2. Call your agent

Some types of business insurance coverage allow you to file a claim online.

However, it’s always best to have an insurance company agent handle the claim for you.

AFLAC sales agent Aimee Pfaff explains why. “Clients should always call their agent to file claims.

Agents know the process to file claims, and we can review them for accuracy prior to sending to ensure prompt, accurate payment of claims.”

3. Don’t admit liability

Avoid admitting fault in incidents like a toaster oven causing a fire or an employee violating traffic rules in a company car.

Publicly acknowledging fault can lead to a default on insurance coverage, as per policy terms.

Allow the claims department to determine fault, and after they pay your claim, your insurance may seek compensation from others involved.

Stay silent on fault to protect your coverage.

4. Create a complete inventory list

Promptly create a comprehensive inventory of stolen, damaged, or destroyed items with supporting documents.

Insurance companies often require a detailed list, and waiting may result in omissions.

Maintain updated computerized records and backups on the cloud.

If faced with unreasonable demands from adjusters, your agent can advocate for you.

For instance, negotiating alternatives, like submitting weekly orders instead of an exhaustive inventory, ensures fair compensation based on your coverage.

5. Get back on your feet as quickly as possible

If your business insurance claim is unpaid, it may affect your operations.

In case of delayed payment, inquire about additional policies for potential coverage.

For example, if your company car is undergoing repairs, check your policy to see if it includes coverage for a rental car.

Don’t hesitate to utilize coverage for business interruption, covering expenses like rent and equipment rental, to keep your business running during claim delays.

6. Document everything

Maintain detailed records of losses or accidents in a folder with police reports, repair estimates, hospital bills, and claim reports.

Document all interactions in writing, including follow-up letters for phone conversations with insurance representatives, specifying dates and names.

If delays occur, rely on your agent’s expertise to navigate bureaucracy, secure an adjuster, and expedite administrative tasks.

7. Get paid quickly

Incase your claim is delayed, contact your agent as the first step. If issues persist, escalate to the claims supervisor and, if necessary, contact the insurance commissioner’s office for assistance under Fair Claims Practices laws.

If you don’t have an agent, consider hiring a cost-effective public adjuster online for expert help in settling your claim efficiently.

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