Business Insurance

If you own a small business or if you are considering going into business for yourself in the future, it's important for you to consider what unique risks this activity might bring into your life. There are many levels of insurance than can protect you from various business risks and, although they can be much more complex than personal lines of insurance, they are well worth taking the time to understand.

Like a comprehensive homeowner's policy, a business owner's policy protects against economic losses caused by damage to the owner's property and by legal liability to others for bodily injury and property damage involving the business.

Usually, the policy primarily applies to your business facility, not your home. But if you operate a business out of your home and can't get your business covered by way of a rider to a homeowner's policy, you'll need to purchase business owner's insurance.

Damage to business owner's property. A business owner's policy covers the same kinds of perils that the typical homeowner's policy does, but it does so for business property.

Example A large tree limb falls on your home, wrecking a portion of your roof and the rooms below (cost to repair = $30,000) and damaging a personal computer system that was exclusively used in your home business (cost to repair = $2,000). In this example, if you had only a homeowner's policy, you would either get only $30,000 (for the wrecked roof and rooms) or nothing at all, if your policy voided coverage if a business is conducted in the house. The full $32,000 of these costs would be covered if you had a business coverage rider to your homeowner's policy, or if you had both a homeowner's and a business owner's policy. In addition to this coverage, you can receive coverage-at extra cost-for income lost as a result of the business's property. This is sometimes referred to as Business Interruption insurance.

Bodily injury and property damage liability. This is probably the most important part of the business owner's policy -- certainly so if you have business visitors in your home workplace. It will cover injuries to your business visitors, whether they were injured in the "personal" or in the "business" portion of your home.

Another type of coverage that you can add to a business owner's policy for extra cost is for product liability. If your business includes the selling of a product, you may be sued if someone is injured using the product. This can happen even if you just distributed the product and had nothing to do with its design or manufacture. Depending on how potentially dangerous the product is, who the user will be, and in what part of the country it will likely be sold or used, the cost for this additional coverage could be reasonable or extremely expensive.

Commercial policies. A business owner's policy is often the most economical way to protect against a broad range of risks that may befall your business. This type of policy is available for many specified types of lower-risk small businesses (such as retail shops and professional offices). If your business does not qualify for a business owner's policy, such as if you operate a restaurant or manufacturing business, you'll need what is known as a commercial policy.

A commercial policy is usually more expensive than a business owner's policy, but is more flexible. It's also more difficult to understand, since unlike a business owner's policy, a commercial policy is written to protect against certain basic risks, with protection against other risks to be accomplished through the purchase of additional coverage, based the specific needs of your business.

Because obtaining adequate coverage under a commercial policy depends on identifying and specifically insuring against all risks beyond those covered in the core policy, your selection of an insurance agent or broker becomes more important if your business needs a commercial policy. In this case, it is vital that your agent or broker is familiar with the operation of your business, as well as knowledgeable about the commercial policies that he or she offers.

Example Different insurance companies have their own rules for what types of businesses will qualify for their business owner's policies (which will usually be significantly cheaper when compared to identical coverage under a commercial policy). So if one insurer won't cover your business under a business owner's policy, ask your agent or broker to check whether it could be obtained through another company.

If your business is located away from home or if it's home-based but growing fast, you'd be well advised to see a business insurance professional and evaluate the cost-benefit of transferring your risk via a comprehensive insurance package designed to protect your particular circumstances.

This sounds more complicated than it actually is. Insurance companies have been at it for centuries and they've thought of risks you never dreamed you had. So they're well prepared to protect you from most perils via a standard policy at a reasonable price. You will be able to keep that price down by electing to take the highest possible deductible you can afford. An annual review of your business insurance with your agent will assure you that you still need what you're paying for and that no new risks have emerged, due to the growth or nature of your business, that are not covered in your package policy.

Business insurance types fit into a concise menu from which to choose. There are three basic types of policy coverages:

• Business Liability Insurance
• Special Business Forms
• Business Property Insurance

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