6 Basic Types of Insurance That You’ll Need When Starting a Business
Just like health insurance, life insurance, car insurance, and home insurance are important for your everyday life, your business requires different types of insurance for everyday business matters. Here are six basic types of insurance that most businesses will need.
#1: General Liability Insurance (GLI)
GLI, also known as business liability insurance or commercial general liability insurance, is one type of insurance that every small business needs. It covers any costs of claims that your business caused bodily injury or property damage. This covers claims like:
- Advertising injuries caused by your business’s ads. An example would be copyright infringement.
- Damage to rented property. These damages can only be covered by what is specified in the insurance.
- Medical costs if someone inside of your business gets hurt.
- Reputational harm, which can be a result of slander, libel, etc.
About 40% of new small business owners will experience at least one of these types of claims in their first 10 years. GLI can cost any amount, it just depends on what type of business you have, the size of your business, and other factors. This is an important task when starting your business and not one you’d want to forget.
#2: Commercial Property Insurance
Also known as commercial real estate insurance and business property insurance, this type of insurance protects your physical business property, whether it’s in a rented (or bought) commercial property or even if you’re running a business out of your home. Commercial property insurance protects the physical assets of your business that get damaged or lost from theft or in a fire. With this type of insurance, you’ll have protection for:
- Your equipment, tools, and other inventory.
- Your building, furniture, and other personal property.
- Anything else your insurance company allows you to customize.
If caused by:
- Natural disasters (blizzards, floods, earthquakes, hurricanes, lightning, etc.)
#3: Errors and Omissions Insurance
This type of insurance protects you and your business from lawsuits and it’s also known as professional liability insurance. Every type of business needs this type of insurance to protect you from claims of:
- Misleading advice
- Mistakes in services
In the event that you are sued for any of these, E&O insurance will cover attorney costs, court costs, and settlements.
#4: Workers’ Compensation Insurance
Most of the time, this type of insurance is required for all businesses to have if you have employees. If your employees have a work-related injury, this type of insurance will cover:
- Their medical bills.
- Any loss wages due to the injury.
- Disability benefits if they’re unable to work.
- Funeral and burial costs if they lose their life.
This type of insurance can also work similarly to errors and omissions insurance, if your employee’s family tries to sue you or your business.
#5: Business Income Coverage
While you’ll have commercial property insurance to cover the repairs and replacements of anything lost or stolen due to a natural disaster or theft, respectively, you may need to close your business for a little while if your building needs repairs. Business income coverage covers any business income that is lost due to you having to temporarily close. This is necessary for businesses, especially if they rely on a physical location and equipment to run their business.
#6: Commercial Auto Insurance
If you use some form of transportation that you or one of your employees operates for business, then you’ll need commercial car insurance. This differs from your personal car insurance, as it won’t cover accidents that occur relating to your business. The good news is that like personal car insurance, you can receive a quote for commercial car insurance.
Certain types of businesses may need additional types of insurance, while others may not need all of these types listed above. It’s important to understand which types of insurance you’ll need to keep your business running smoothly.