Business insurance is an umbrella term that pertains to different types of policies a company can get to cover certain risks. Unfortunately, unmitigated risks can be detrimental to the company’s operation. Typical examples include the risk of property damage or loss due to fire and other disasters, the risk of getting sued for professional negligence, and the risk of employees sustaining injuries while at work.
It is a sound business practice to ensure that there is ample coverage depending on the nature of the enterprise and the company’s exposure to these circumstances. The law makes a few of these insurances mandatory, while some are optional yet recommended. In general, there are two types of business insurance applicable to small businesses as defined by the US Small Business Administration:
- Employer insurance – required by law
- Commercial business insurance – not required by law in many states across the country
Types of business insurance that are required by law for most states are workers compensation, disability insurance, and unemployment insurance tax. These insurances are not only beneficial for employees but protect the company from costly complaints and lawsuits. In many ways, what the law requires is to provide a favourable working environment for employees, but at the same time insulate the company against the unnecessary cost should complaints arise.
Why is business insurance necessary?
Commercial business insurance that is not mandatory include:
- General liability
- Professional liability
- Property insurance
- Product liability
- And auto-insurance
These are only some of the different types of recommended insurance every business should consider getting. What these cover are risks that are related to negligence, malpractice, personal injury, damage to property, and product complaints, among others. The necessity of these insurance policies cannot be stressed enough considering how costly and inconvenient lawsuits are.
Benefits of having business insurance
Apart from covering the cost of possible litigation arising from complaints, business insurance has the following additional benefits:
- Avoid interruption to business operation. Natural disasters such as flood or fire will disrupt business operations. Instead of waiting for the company to recover from the loss, commercial property insurance may provide for a portion of the company’s income while it is not operational.
- Enhance the company’s credibility. Businesses that provide professional advice or services need professional liability insurance not only to cover in the event of negligence claims but also to show clients that the operation is reputable. Clients are more likely to trust a company when there is assurance that their services are insured or bonded.
- Business contracts may require it. When a company owner enters into an agreement with another entity, some provisions of the contact may require insurance coverage from the contracting party. For example, if you are leasing a facility used for business operation, the landlord may not provide the necessary coverage for the property. There are also come contracts for services where the client requires professional liability insurance for protection.
The future is unpredictable, and if a company wants to succeed, mitigating these risks is essential. Therefore, it is not wise for any company, regardless of size, to operate without insurance. For more information about business insurance, contact Next Insurance today for a quote on professional and general liability insurance coverage for your company.