Thursday, April 28, 2022

Small Business Insurance Basics



Insurers often combine multiple insurance coverages into one package that is sold as a single contract. The most common policy for small businesses is the businessmen's policy (BOP).

Small Business Insurance
Small Business Insurance

BOP combines all major property and liability insurance risks as well as several additional coverages into one package policy suitable for most small businesses. The term "BOP" specifically refers to the insurance policy language developed (and modified as needed) by experts at ISO. ISO provides insurance companies with sample insurance policy language, research and many other products.

BOP includes business income insurance, sometimes called business interruption insurance. It compensates a business owner for income incurred after a disaster. Disasters usually disrupt operations and can force a business to evacuate its premises. Business income insurance also covers additional expenses that a business may incur if it operates from a temporary location.

To cover specific risks associated with a business, a variety of additional coverages can be added to the basic BOP. For example, if a business has an outside sign, the BOP doesn't cover it unless coverage is specifically added for the additional premium. If a business relies on electronic commerce, the owner can add coverage for lost income and additional expenses if a computer virus or hacker slows or shuts down the business's ability to conduct e-commerce. Is.

Only small to medium-sized businesses that meet certain criteria are eligible for BOP. Factors that insurers consider include the size of the premises, the required limits of liability, the type of business, and the extent of offsite activity. Premiums for BOP policies are based on those factors as well as business location, financial stability, building construction, safety features and fire hazards.

major coverage

Most small businesses are required to purchase at least the following four types of insurance.

1. Property Insurance

Property insurance indemnifies a business if the property used in the business is lost or damaged as a result of a variety of common perils, such as fire or theft. Property insurance covers not only a building or structure but also what the insurer refers to as personal property, which means office goods, inventory, raw materials, machinery, computers and other items important to the operation of the business. Depending on the type of policy, property insurance may include coverage for equipment breakdown, debris removal after a fire or other catastrophic event, certain types of water damage and other damages.

2. Liability Insurance

Any enterprise can be sued. Customers can claim that the business has caused them harm, for example, by a defective product, error in a service, or neglect of another person's property. Or a claimant may allege that the business has created a dangerous environment. Liability insurance pays damages for which the business is found liable to the extent of the policy, as well as attorneys' fees and other legal defense expenses. It also pays for the medical bills of anyone injured by the business or on its premises.

3. Business Auto Insurance

A business auto policy provides coverage for autos owned by the business. Insurance pays third parties any costs resulting from bodily injury or property damage for which the business is legally liable to the extent of the policy.

4. Workers Compensation Insurance

In all states but Texas an employer must have workers' compensation insurance when there are more than a certain number of employees, which varies from three to five depending on the state. Workers' insurance, as this coverage is commonly called, pays for medical care and replaces a portion of lost wages for an employee who is injured in the course of employment, regardless of the injury. It's anyone's fault. When an employee dies as a result of injuries sustained while on the job, insurance provides compensation to the employee's family. An extremely small business, such as one operated out of a household by one or two people, may not require workers' compensation insurance. But it often requires more property and liability insurance than is provided in a typical homeowners policy.

Other types of business coverage

1. Errors and Omissions Insurance/Business Liability

Some businesses include services such as advising, making recommendations, designing things, providing physical care, or representing the needs of others, which can lead to claims by clients, clients or patients that the business is functioning properly. Failure to do so has injured them. , Errors and omissions or professional liability insurance covers these situations. The policy will pay any judgment for which the Life Assured is legally liable to the extent of the policy. It also incurs legal defense costs, even when no wrongdoing has been committed.

2. Employment Practices Liability Insurance

Employment practices liability insurance cover (up to policy li. mit) damages for which an employer is legally liable such as employee's civilinfringement of ric or other legal rights. In addition to paying a judgment for which the insured is liable, it also incurs legal defense costs, which may be substantial even if no wrong has been committed.

3. Directors and Officers Liability Insurance

Directors and officers' liability insurance protects directors and officers of corporations or non-profit organizations if a lawsuit claims that they have managed the business or organization without due respect for the rights of others. The policy will pay any judgment for which the Life Assured is legally liable to the extent of the policy. It also provides for legal defense costs, even where no wrongdoing has been committed.

4. Key Employee Insurance

Life or disability income insurance can indemnify a business when certain key workers die or become disabled. These coverages mitigate some of the adverse financial impacts that result from losing the participation of a key employee.

5. Umbrella Policies

As the name implies, an umbrella liability policy provides coverage over and above the other liability coverage of the business. It is designed to protect against unusually high losses. It provides protection when the policy limit of one of the underlying policies has been used up. For a specific business, the umbrella policy will provide protection beyond general liability and auto liability policies. If a company has employment practices liability insurance, directors and officers liability, or other types of liability insurance, the umbrella can provide protection beyond those policy limits as well.