What Kind of Business Insurance Do I Need?

Running a business can be a risky affair. We frequently hear stories about grocery stores getting sued for slippery banana peels, restaurants being accused of food poisoning and similar fiascos. Construction sites, doctor?s offices and tax preparers are also common litigation targets. Depending on the type of business you own, insurance may be available to help protect against these risks. If business insurance is available, and you do not obtain it, the slightest mistakes can spell financial ruin.

Here are five common types of business insurance and how to know whether you need them:

General Liability

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The most basic and comprehensive form of business insurance is general liability coverage. In essence, general liability insurance exists to protect business owners from lawsuits or judgements arising from accidents, injuries or claims of negligence. While not every general liability policy is the same, they typically protect against the following hassles:

• Property damage
• Libel
• Slander
• Settlement bonds
• Medical expenses
• Bodily injury
• Legal fees

As Dun & Bradstreet explains, ?the insurer is obligated to pay the legal costs of a business in a covered liability claim or lawsuit? rather than the business owner paying them out of company or personal funds. Like automotive or homeowners insurance, general liability policies always state a maximum amount that will be paid during the policy period, as well as a maximum amount the insurer will pay per incident. Legal damages above and beyond this cap are the responsibility of the business.

Professional Liability Insurance

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If you run a service business (such as a doctor?s office) professional liability insurance is often a smart option. Unlike general liability, professional liability covers the more specific risks pertaining to service firms, including:

• Errors
• Malpractice
• Negligence in providing services to clients or customers

In fact, depending on your exact industry, obtaining a professional liability policy may be required by law in your state. Physicians are obligated by law to be covered by a professional liability policy before practicing their specialty in most states. Even if the law does not explicitly require it, conduct your own risk analysis and decide whether it makes sense to voluntarily get insured. The less litigious your sector, the less of a reason there is to buy professional liability insurance.

Product Liability Insurance

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Every few years, news stories break about infants choking on toys or gadget malfunctions wreaking havoc on their owners. Were it not for product liability insurance, companies responsible for the product defects like these would go bankrupt. Unfortunately, this type of business insurance can be quite pricey. In a June 2009 article, BusinessWeek wrote about the difficulty of obtaining this form of coverage, especially among small or unproven startup businesses.

In some cases, BusinessWeek says, merely getting an insurance broker to return your phone calls or generate a price quote is a struggle. That said, if your product is dangerous or even potentially dangerous, going without coverage means you are basically rolling the dice with the entire business.

Commercial Property Insurance

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Commercial property insurance is intended for businesses with large office space, manufacturing facilities, warehouses or similar structures. Depending on the exact provisions of your policy, this coverage insures everything from fire, smoke and wind damage to acts of civil disobedience or vandalism. Moreover, ?property? tends to cover a lot of territory, including such risks as lost income, destruction of computer systems, interruption of business or service hours and theft of money.

There are two basic types of commercial property insurance:

• All-risk policies (which cover a large expanse of risks and incidents other than those specifically excluded)
• Peril-specific policies (which cover only the risks listed in the policy)

Small business owners are generally the best fit for all-risk policies. Peril-specific policies, on the other hand, usually make the most sense for businesses at risk for specific damages (like companies who handle large amounts of cash.) An insurance agent or broker can assist you in deciding which, if either, makes sense for you.

Worker?s Compensation

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Businesses that expose their staff to on-the-job injury risks must typically purchase worker?s compensation insurance. The issue of worker?s comp can become confusing because it operates differently on a state-by-state basis. As About.com explains:

Most states have put into place some form of workers? compensation system. Workers? compensation is a system where the employee is not allowed by statute to sue their employer for on-the-job injuries; but, in return, the employer must participate in a system that provides nearly automatic payment to the employee in case of injury for medical bills and damages.

Some states allow an employer to opt-out of the system if the employer is self insured, some run the system through private insurers while others use state agencies. Finally, some states, by virtue of case law or statute, require additional insurance above workers? compensation such as ?stop-gap? coverage or ?scaffolding liability? as just two examples.

If you are not already clear on what your state?s rules concerning worker?s comp are, now is the time to find out ? before an accident thrusts those rules into your face unexpectedly.

Source: http://www.contactme.com/blog/how-to/what-kind-of-business-insurance-do-i-need/

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