A Guide To The Different Types Of Business Insurance

Recently updated on October 25th, 2022 at 11:02 am

The right business insurance policy can be challenging to find. Your insurance coverage can be as comprehensive or as light as you want it to be, with specialized policies for many industries and a broad spectrum of add-ons that can work for any small business.

There are different types of commercial property insurance you may encounter in your research, and how they can help safeguard your business assets in varying ways. 

Business insurance normally falls into two main categories: coverage that pays you in the event of an interruption to your business or in the event of damage, and coverage that pays for any money you owe others. Some of this insurance can belong to both categories.

Whether you’re the person who pockets the insurance money or otherwise, all the policies below protects your company’s assets in the event of an incident.

1. General Liability Insurance

This insurance policy is a core component of business insurance and is best purchased as part of a business owner’s policy. It fundamentally protects you from claims and lawsuits from individuals outside your company. 

The people outside your company are the beneficiary in the event of a claim. Any of their damaged possessions covered under the policy will be repaired or replaced.

2. Commercial Property Insurance

Commercial property insurance is another core component of a business insurance policy that pays out for any damage or loss of property like business vehicles or office buildings. Specialized add-ons can be incorporated for an additional fee if your industry has a higher risk for damage. The beneficiary in the event of a claim is you and your company.

3. Business Income Insurance

The policy is also known as business interruption insurance. It financially protects you in case of a covered disaster or situation that prevents you from operating your business. This insurance policy usually is incorporated as part of the business owner’s policy and reimburses you for any lost business, payroll, income, and taxes. Add-ons are available for anticipated expenses like temporary workers or extra overtime working.

In the event of any claim, the beneficiary is you and your business. Your employees will indirectly benefit through payroll coverage.

4. Worker’s Compensation Insurance

The policy protects you from claims or lawsuits resulting from employees’ injuries that occur at work as a result of the nature of their work. The requirements for coverage vary from one state to the other. In case of a claim, your employees are the beneficiaries.

5. Professional Liability Insurance

It safeguards you from patients or customers who may seek to sue your company for real or perceived injury or damages. This type of liability insurance compliments your business owner’s policy coverage by covering under general liability. Specialized coverage can also be added to your policy to cover industry-related incidents. For example, bakery insurance is important to cover you for food contamination issues. The beneficiary in case of a claim includes your customers and clients.

6. Cyber Liability Insurance

A cyber liability policy is designed to protect you and your business if your digital data is compromised. A typical add-on covers your operational expenses as well as incurred by customers whose online security has been impacted. Covered expenses can include the costs of data recovery, improving your digital security, and even public relations expenses used to restore your company’s reputation. In the event of a claim, you and the impacted individual can benefit from it.

7. Business Identity Insurance

If anyone steals your business identity, a business identity insurance policy can help you to recover the losses and help mend your business’s credit profile as well as professional reputation. In case of a claim, you and your business will benefit from it.

8. Commercial Auto Insurance and Fleet Coverage

This policy comes bundled in a commercial car insurance policy. If an accident occurs where your company is at fault, commercial car insurance pays the medical bills and damages sustained by impacted people and their possessions.

Collision and comprehensive coverage is an add-on that pays for vehicle damages from vandalism, theft, fire, or flood, as well as damage from other cars. Commercial fleet coverage is similar but is bought as a separate policy, and some states mandate a minimum requirement for coverage. In case of a claim, the beneficiary includes individuals who have suffered injuries, possession damage, or loss as a result of your business vehicle.

9. Commercial Umbrella Insurance

Umbrella insurance kicks in after you have maxed your liability coverage for that particular incident. The beneficiaries include people whose claims against your company are higher than the amount paid out by your regular insurance coverage.

10. Key Person Insurance

If you or any other core employee is incapacitated, key person insurance can be used to pay for lost income, hire a replacement, or cover similar expenses related to the loss of a core business leader. In case of a claim your business if you die or get incapacitated will benefit.

Final Thoughts

By having the right insurance in place, a business can avert a major financial loss due to a catastrophic event or a lawsuit. You must be familiar with your state’s business insurance laws to make sure that you’re complying with the regulations. The above policies can be customized to fully meet your coverage needs and budget.