Business Insurance – What You Need to Know

Business insurance helps cover the costs associated with unexpected events, such as property damage, theft and lawsuits. It can also help pay for lost income while your business is under repair after a disaster.

Different businesses need a variety of coverages to protect against different liabilities and risks. Here are some of the most popular types of business insurance: BOP, EPLI and general liability insurance.

Commercial insurance

Commercial insurance helps businesses cover financial loss due to accidents, natural disasters, theft and unforeseen events that could damage or destroy business property or bring lawsuits. These policies help companies recover from the economic impact of these events, giving them peace of mind to focus on improving customer service and employee satisfaction.

There are several types of commercial insurance, each with its own set of coverages and deductibles. Some of the most common are general liability insurance, which protects the company against claims of bodily injury or property damage caused by the business’s services or business operations; commercial auto insurance to cover company-owned vehicles; business interruption insurance to cover lost income; and workers’ compensation insurance to protect employees from injuries on the job.

When choosing a commercial policy, it’s important to work with a broker-agent who has experience with the type of business you operate and understands your specific risk exposures. A full-service broker will review your business needs and recommend the appropriate policies, as well as explain your options for deductibles and coverage limits.

Business owners policy (BOP)

BOPs package essential property and liability protection into one policy, resulting in savings for the business. A BOP typically includes commercial property insurance to safeguard against damage to your buildings, equipment and inventory; general liability coverage that protects you from lawsuits for bodily injury or property damage arising out of your operations; and business interruption insurance to pay your bills while the company recovers from a covered loss. You can often add endorsements to customize your BOP.

Bops don’t include professional liability, business auto insurance or workers’ compensation. You’ll need separate policies to cover those risks.

Generally, small- and medium-sized businesses are eligible for a BOP. Larger companies may not qualify, as they’re likely to need more customized coverage based on their industry and specific risk profile. You can also get a commercial umbrella policy for additional liability protection. This can help you reach your desired limit for each of these coverages. It is important to discuss your options with a licensed agent. They can help you determine which type of business insurance is right for your needs.

Errors and omissions insurance (E&O)

Professional liability insurance, also known as errors and omissions (E&O) coverage, safeguards your business from lawsuits over mistakes or oversights that fall under your area of expertise. It’s a common form of business insurance for businesses that provide advice and services to customers, such as consultants, financial advisors, insurance agents, home inspectors, and lawyers.

An E&O policy covers the legal fees and settlement costs that come with claims of negligence or substandard work. Many clients, business partners, and licensing boards require that your company carry an E&O policy.

How much you pay for an E&O policy depends on the size of your business, industry, and risk. Companies with high-risk industries, those that have a history of malpractice lawsuits, and those with higher-than-average claims will typically pay more. The insurance provider will also consider your coverage limits and risk class when calculating the cost of your policy. NerdWallet’s Business Insurance Tool allows you to get a personalized quote for an E&O policy. You can also find out which types of business insurance your competitors are carrying and compare their rates.

Professional liability insurance (PLI)

Mistakes happen, but when those mistakes cost clients time and money, the business can be sued. This type of insurance protects businesses such as accountants, lawyers and physicians from lawsuits related to negligence, errors or omissions. Some clients may require this coverage before signing a contract, and it can also be useful for businesses that make their living providing expert advice and services.

Insurance companies calculate the premium for this type of policy based on several factors, including past and expected revenue and the types of contracts a business typically signs. A business owner can also add on optional coverages or a lower deductible to help reduce the costs.

Like other types of liability coverage, this type of policy is available as a claims-made or an occurrence policy. Claims-made policies cover incidents that occurred while the policy was active, but an occurrence policy may also pay out for events that took place prior to its purchase date, assuming it was in force at the time of the incident. NerdWallet recommends the Berkshire Hathaway-owned insurer biBERK as a good option for small business professional liability coverage.

Business interruption insurance

The cost of losing revenue due to a temporary shutdown can be catastrophic for businesses that rely on their physical locations and assets. Paying employees who cannot work, replacing inventory, and opening a new location all cost money. Those costs may force even financially stable companies to close their doors permanently without comprehensive business interruption coverage.

The main requirement for receiving business interruption insurance benefits is that your property suffer direct, physical damage from a covered peril. For example, a grease fire in your restaurant can cause significant damages that require the place to be shut down for repairs. This triggers the clock on your business interruption coverage, which reimburses you for lost income during a specified period of time known as the restoration period.

Most commercial property insurance policies include business interruption coverage as an option. However, the specific terms and conditions vary by policy. It’s important for risk professionals to familiarize themselves with these terms and conditions so that they can effectively assess and understand their companies’ business interruption insurance coverage needs.assurance pro

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