Business Insurance 101: A Beginner’s Guide

You’re a budding entrepreneur or a first-time business owner. This is an exciting stage filled with possibility, but also one filled with trepidation. How do you protect your business from financial loss? In this beginner’s guide, we break down some of the types of insurance you may need.

Commercial Property Insurance

If you own the real estate you’re working out of, then property insurance can be an effective safeguard against natural and man-made disasters such as fires, earthquakes, vandalism, and theft of furnishings and equipment.

Just check if your policy is an all-risk one or one that covers only listed disasters. For example, does the policy cover terrorism and floods? Some require separate cover for these events. If your business owns vehicles, then commercial auto insurance is another way to limit the loss of property.

General Liability and Product Liability Insurance

This type of insurance is frequently necessary for companies that work in the public sector. An important countermeasure in the event that legal fees are required or compensation costs need to be paid for any third-party injury or damage to property as a result of your product, service or a freak accident on your premises. It could also cover claims for misleading advertising, defamation and copyright infringement.

Management and Professional Liability Insurance

When a doctor causes unnecessary harm to a patient, the patient can claim medical malpractice. This concept applies to every business. Often obligatory, professional liability insurance exists for situations where there has been negligence on the part of the company, for example, when a service offered has failed to deliver the promised results. Mistakes could include confidentiality breaches or faulty engineering designs.

Cyber crime insurance is also linked to professional liability as sensitive client data may be compromised while on a business’s servers. Important documents and financial information could be lost so records retention policies may be relevant if your business handles a lot of data.

Workers’ Compensation Insurance

This is another type of insurance that’s often mandatory for companies with more than one employee who is not a family member. It covers the hospital costs and lost wages for any of your employees who get hurt or become sick as a result of the workplace and can include support for families of employees who are disabled or even killed on the job. Disability insurance extends to paying partial wages for eligible non-work related injuries and illnesses.

Another related type of insurance is employment practices liability which protects the business in the event that employees are accused of discrimination or sexual harassment.

Business Continuation Insurance

Property insurance will cover your physical assets if there’s a disastrous event, but if that event causes your business to shut down for a substantial amount of time, you’ll need back-up funds to keep you afloat during this period. Business interruption insurance helps you meet your financial commitments such as rent or salaries while your business is incapacitated.

Key Person and Life Insurance

If your business has more than one owner, the business can take out life insurance on each of the partners. If one partner dies, insurance can then be used to buy out the deceased’s share in the business so operations can continue without the deceased’s family getting involved.

Package Policies

It’s not uncommon that more than one insurance company is utilised by a business. But many insurers also offer package policies which are multi-faceted and address all the basic concerns of an SME at a better price than if the policies were bought individually. A home-based business can be sufficiently insured for only $500 a year.

Commercial Umbrella Insurance

Think of this as a sort of gap cover for situations where damage is significant and your policies alone are insufficient. Umbrella insurance can also cover you for liabilities that other policies don’t cover. Umbrella cover is important but remember that the only thing worse than being underinsured is being over-insured.

Now that you have some idea of what’s required and available, look into what needs to be done to lower your premiums. Whether you’re in the cow business or the car business, there’s probably a specialist policy for your niche. Chat to your broker so that you can get a level of cover that you’re comfortable with at premiums that you can manage.

Previous articleThe Basics Of How Wearable Medical Devices Are Manufactured
Next articleWhy Hiring A Design Studio Can Be A Huge Value-Add
Melissa Thompson

Melissa is a mother of 2, lives in Utah, and writes for a multitude of sites. She is currently the EIC of and writes about health, wellness, and business topics.