The size and scope of your small business largely determines the type of business insurance policy you should carry. Some one-person, microbusinesses may not feel the need to purchase insurance. A craft seller who generates small revenue streams and owns minimal business equipment could decide that the cost of insurance premiums outweigh the chance of financial loss. Larger companies, those with significant inventories or multiple employees, simply must seek protection against a crippling fire, lawsuit, or motor vehicle accident. In such instances, paying damages from cash reserves could permanently shut the doors on a thriving operation. Examine the basic types of business insurance policies to gauge the best fit for your company.
General liability policies exist to protect your organization from negligent acts committed by you or your employees, or the faulty performance of products sold and operations completed. Small business owners such as plumbers who work on residential and commercial structures can purchase general liability policies to insure themselves against property damage suffered by customers. The loss incurred by a client may result from the leaky pipework that caused water to ruin interior walls, floors, and fixtures, the replacement of which could run from a few thousand dollars to more than a $100,000. Liability insurance can be purchased by independent contractors in amounts ranging from $100,000 to $1 million or more. Business owner package policies combine liability coverage with business property coverage, often basing premium amounts on payroll figures. Sole proprietors without employees can expect to pay a lot less in premiums than a company with 20 employees earning an average of $35,000 annually.
Business Property Insurance
If your company carries significant inventory or owns manufacturing equipment, you should acquire commercial property policies to insure against the risk of those assets being stolen or destroyed. Wear and tear on machinery is not covered, but damage caused by an electrical fire to a sophisticated commercial printer could be claimed under a business property contract. Policyholders can choose to insure equipment for replacement value or actual cash value. Replacement value coverage, which commands higher premiums than ACV, indemnifies businesses for the cost of a new piece of equipment of like kind and quality. The less expensive ACV coverage takes depreciation into account when calculating the dollar amount of the damaged machinery. Along with contents, commercial property also extends to buildings and associated structures such as fencing or garages. Policies clearly define what perils are covered under the contract. Roofs, siding, or windows destroyed in a windstorm fall under the coverage umbrella. But it’s important to note that overland flood insurance must be obtained separately from the common commercial property policies. Flooding from overflowing rivers or lakes differs in the eyes of an insurance company from water damage incurred by rain pouring through a hole in a roof or an overflowing toilet.
Business Auto Insurance
In 2014, Transport Canada recorded motor vehicle accidents involving 149,900 personal injuries, almost 10,000 of which were serious. If your business owns and operates vehicles in the course of daily business, commercial auto insurance is a necessity. These business policies protect against legal action pursued by injured parties or the families of passengers who may have been killed in a crash. Damages levied against your company as a result of an at-fault accident could soar into six-figure awards and beyond. Business auto policies typically contain three main components: liability, property damage, and collision or comprehensive coverage. Auto liability can be purchased in large dollar amounts, covering potential damages in the wake of personal injury or death of a passenger or pedestrian. Property damage pays claims to those parties whose property you or one of your employees may have ruined. Collision coverage offers compensation by insurance carriers for damage incurred by your business vehicles through contact with another vehicle or object.
Business Interruption Insurance
Businesses that suffer significant losses due to fire or flooding may be indemnified for damage to offices or retail space; property insurance doesn’t help pay employees, vendors, or utility bills. Companies need to explore business interruption policies that offer a way to keep business thriving even while the doors may be temporarily closed. Most proprietors think of the obvious assets, such as warehouses, computers, and stock, but often, overhead expenses may be overlooked when designing an insurance program. Also known as business income insurance, this coverage limits itself to the documented monthly costs required to keep the business afloat as repairs to the workplace are being made. For added premium, these policies may also cover the cost of leased space in addition to paying current leases or mortgages. Maintaining the same financial condition pre- and post-disaster is the ultimate goal of the business income policyholder. Small losses occur on a daily basis in organizations. There are reams of paper tossed in the shredder and idle hands that dent revenue streams. Large, unforeseen financial blows, on the other hand, can’t be withstood. Business insurance polices assure that your company can recover from calamities, offering protection that your cash coffers never could.