What does business insurance cover?
No single policy protects against all business risks. Different types of business insurance protect against customer injuries, property damage, cyberattacks, and other threats to your business.
What is business insurance?
Business insurance is insurance coverage designed specifically to help protect businesses from a variety of everyday operational risks. Business insurance can provide protection against burglaries, property damage, and lawsuits brought against the company by employees or customers.
Your industry risks will help determine which types of business insurance you should purchase. Other factors, such as lease requirements, state laws, and signed contracts with clients, will help you understand if and when you need a certain policy.
Learn how Insureon experts remain committed to protecting your small business
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DY KUNKEL, VP ACCOUNT MANAGEMENT: Typically, our clients come to us originally for, let's say, a general liability policy. And they are getting that to meet contract requirements.
When they come to the account management team or at renewal time, they're looking to grow those contracts or they have a new contract, so they typically are adding on workers compensation, or they might need an umbrella limit to meet those requirements, or professional liability.
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When a customer comes to our website, the producer will work with them to get their coverage in place initially, and then after 32 days post bind of that policy, it'll rotate over to an account manager based on the business class and which vertical that client fits into in our account management team.
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And then the account manager will handle that policy and that customer for its longevity as long as it stays with Insureon, it stays with that account manager to work with the client, grow the client, and provide them whatever they might need.
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These account managers, they help retain our book of business, so their goal is to renew all the business that comes through our agency and keep it on the books, as well as grow our clients, provide customer service, as well as also cross-selling and upselling new policies to those clients to meet their business needs.
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We best serve our customers through making sure that they fit with each of our carriers by underwriting, as well as looking at each of the business's needs individually, and then matching that with our core markets that we work with and their pricing, as well as their coverages that they offer.
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We've seen a steady increase in customers over the past few years because of our technology offerings that we have. The marketplace, and most of the world, looks for things to be instantaneous. They want it on their cell phone, they want to be able to receive it immediately, and our product offerings give that to the client.
We can give them a quote in a minute, or we can provide them a certificate of insurance automatically, and all of that is done through our technology. We keep our customers coming back to us year-over-year because we have trusted insurance advisors as account managers.
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They have numerous years of experience in the insurance industry, as well as we also offer great renewal processes and procedures that provide ease of use to our clients by utilizing our technology. Typically our customers are purchasing additional policies, as well as renewing year after year. We don't typically see them coming to us for other needs.
Clients are unable to get something in an instant as far as insurance goes, they're going to walk into a local insurance agency where it could take up to a week for them to get their insurance quote or their certificate, where we can provide it to them in an instant.
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Insureon has a customer portal that gives clients access to their policies. If they want to review their policies, they can also make changes and request those changes direct on our portal, as well as they can go in and get their own certificate of insurance without ever having to interact with a human. Technology is definitely the future for small business insurance.
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Most of the insurance carriers and companies out there don't offer a technology advantage like we do, and again, everybody wants things on an instant basis, and so we're able to provide that to customers, and I think that's the way the insurance industry has to go if they want to keep up with the everchanging world.
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What business risks are covered by the different types of business insurance policies?
In general, small business insurance can cover risks associated with:
- Clients and customers
- Employees
- Property
- Motor vehicles
Each category has a policy (or several policies) that provide coverage.
Clients and customers
Your business wouldn’t be much without your customers and clients. Unfortunately, interacting with clients brings the risk of lawsuits, which are not cheap. The good news is there are several business insurance policies to help manage the risks presented by clients and members of the public.
Consider these scenarios when reviewing insurance options and determining what will be the right coverage for your company:
- A customer has a slip-and-fall accident on your property. General liability insurance can help pay for immediate medical expenses and lawsuit costs if you're sued over a non-employee's injury or property damage. This policy can also be valuable for independent contractors
- Your client loses business income after taking your professional advice. Professional liability insurance (also called errors and omissions insurance) generally pays for your defense if a client alleges you made mistakes that cause them financial loss or property damages
- An employee loses their laptop, exposing your clients' financial information. Cyber insurance helps cover the cost of notification, credit monitoring, and other expenses if sensitive digital information is jeopardized
- An overserved patron hurts someone at your bar. In all 50 states, a business can be held liable for alcohol-related damages, including fighting injuries and damage to patrons' property. In 42 states, a business can be liable for damage caused by drunk patrons after they leave. Liquor liability insurance can help manage those risks
Employees and management
Employees and managers help your business grow, but they also introduce more risks to your daily operations. For example, when you have employees, you can be liable for their workplace injuries and violating their work rights.
Here are a few situations where business insurance can help:
- Your employee is hurt on the job. Some industries are inherently safer than others, but even office workers can be exposed to work-related injuries. Most states require employers to carry workers’ compensation insurance, which covers employees' occupational injury expenses
- An employee sues your business over workplace discrimination. Employment practices liability insurance can cover disputes stemming from the employer-employee relationship
- Businesses with a board of directors may want directors and officers insurance. D&O insurance addresses disputes over decisions the board makes on behalf of the organization
Business property
It's easy to imagine how a fire could devastate a business. For that reason, small business owners often purchase commercial property insurance (also referred to as business renter's insurance) especially if they own specialized or valuable business property. When certain weather events or disasters strike, it can help cover the cost of repairing and replacing your property.
Property insurance also protects against burglary and theft, two of the most common small business claims.
Many Insureon customers are eligible for a business owner’s policy (BOP), which bundles property insurance and general liability. It’s usually less expensive than buying the policies separately.
Small and medium-sized businesses with higher risks often look into purchasing a commercial package policy (CPP), which operates similarly to a BOP, but offers more flexible protection options to meet their increased levels of risk.
Other useful property insurance policies you should consider include:
- Inland marine insurance covers products, tools, and equipment while being transported over land or stored off-site
- Contractor's tools and equipment insurance, also known as equipment floater insurance, helps contractors and those in the construction industry cover the cost of replacing tools and equipment that are lost, stolen, or damaged while in transit or at a job site
- Business interruption insurance helps with the cost of day-to-day expenses, lost revenue, and relocation from a business interruption
Motor vehicles
Small business owners are often unclear about the coverage they need for their vehicles. Many think they can drive their personal auto for business because it’s insured, but that can be a costly mistake if you or your employee gets in an accident. Vehicle claims average $45,000 for small business owners, according to a study by The Hartford.
That's why it's smart to carry additional coverage if you drive for work, especially if:
- You have a business-owned vehicle. Whether you have a fleet of delivery vans or a single automobile, a vehicle registered in your business's name requires commercial auto insurance
- You ask employees to drive their personal vehicles for work errands. Your business can be liable for accidents involving personal vehicles that are used for business purposes. When that happens, hired and non-owned auto insurance can help cover lawsuit expenses
For more information on these two policies, read “Commercial auto insurance vs. hired and non-owned auto insurance.”
How much does small business insurance cost?
Commercial insurance can be affordable for small business owners. Median costs for common policies include:
General liability: $42 per month
Workers' comp: $45 per month
Business owner's policy (BOP): $57 per month
Professional liability/E&O: $61 per month
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What factors determine the cost of small business insurance?
Factors that influence business insurance costs include:
- Your industry and risks
- Business operations
- Number of employees
- Policy limits and deductibles
What does small business insurance not cover?
While small business insurance is crucial for most small businesses, it does not provide all the protection you need. In some cases, you may need to request insurance endorsements to your policies.
Endorsements allow you to customize your policy to better fit your needs or budget without having to shop for – and buy – a new policy. This will allow you to buy insurance that better fits your needs. For example, if a policy you’re considering doesn’t protect a key person, you can ask your agent to add an endorsement that adds this missing protection.
Some common situations where you'll need an insurance endorsement include:
Protection for someone who is not on your insurance policy
Anyone who is not on your insurance policy remains unprotected. To protect those who are working with or for you, but are not on your policy, you'll need an additional insured endorsement.
Additional insured endorsement adds someone other than you to your insurance policy – most often general liability insurance. It extends your insurance to a third party, such as a subcontractor doing work for you. This would protect that entity against third-party lawsuits or commercial property damage.
Claims made outside your policy coverage dates
Any claims made before or after your coverage policy dates are not protected. For protection outside of your begin and end policy coverage dates, you'll need an endorsement.
Prior acts coverage endorsement modifies a claims-made liability policy to protect you against losses that occurred before you bought your current policy.
Extended reporting period endorsement modifies a claims-made professional liability (also known as an errors and omissions insurance) policy so you can report claims even after the expiration date of your insurance policy.
Physical damage to an electronic device
Electronic data liability endorsement expands your property damage liability coverage to include a loss of data caused by accidental damage to a customer’s computer, hard drive, or other data storage equipment.
While cyber liability insurance usually covers data lost from a targeted software attack, electronic data liability insures a data loss when there’s accidental physical damage to a network or storage device.
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