Business Insurance

What kinds of insurance do I need for my business?

Business insurance is a broad field. There are many risks facing a business, only some of which can be covered by business insurance. You won't be able, for example, to find a business insurance policy that can cover you against losing clients or deals (except in certain, very limited, circumstances). You won't be able to get protection from macroeconomic change, or from the dangers of producing a failed product.

But the existence of risks that you can't protect against just makes it more crucial to take out business insurance against the areas you can protect yourself from. Here are a couple of areas you need to think about, and some thoughts on how to arrange cover. Bear in mind that in addition to these, you need to think about many of the same areas of insurance as you would take out for yourself: business property insurance, business vehicle insurance, and medical insurance for your employees. Now, let's move onto a couple of specific areas where a business needs to have good cover...

Workers Compensation Insurance

Workers compensation insurance forms an important element of business insurance, and in most parts of the United States it is a legal requirement that you have adequate workers compensation insurance for your business.

The term refers to insurance which will pay out any payments due to workers who are injured in the course of their work. The amount of these payments must generally be sufficient to cover their medical costs, any loss of earnings, and possibly other costs.

When buying business insurance, make sure your insurer is familiar with the legal regime in your state, and that their policy will cover it. In many cases you will want to go beyond the legal minimum, ensuring that your workers have comprehensive cover in the event of them being injured at work.

Employee life insurance

It's a well-known fact that the loss of an employee can massively harm a business. If you've been to any kind of management school, you've probably had discussions of what happens if somebody 'falls under a bus', and how to deal with the ensuing catastrophe. Part of the answer should be to take out insurance. This can't stop the harm to your business procedures - good management and planning is the only way to do that - but it can provide enough financial compensation that you don't fall into the red because of somebody's death. Employee life insurance should thus be treated as an essential component of any business insurance package.

One thing to be careful about is that (from an insurance point of view, rather than personally) you aren't so much interested in an employee's life, as in his or her ability to work. You don't want to be stuck with a policy that won't pay out when an employee is alive but unable to work.

Buying comprenensive cover, or rolling your own package?

One of the choices you'll have to make when you buy business insurance is whether to buy each form of insurance separately, or to get a comprehensive policy that will cover all your needs.

Each approach has its advantages. A comprehensive business insurance policy is easier to set up. That makes it a good choice for smaller businesses, where an employee taking a day out to set up insurance makes a noticable dent in the overall productivity of the comany, and where the many man-hours needed to set up each kind of business insurance policy can be costly.

Specialised cover might be a better deal if your business has particular needs. For example if you operate a fleet of commercial vehicles, you will probably want to arrange a special form of business auto insurance for them. If you operate a factory, then you will likely be at greater risk of injury to your employees, and so you will probably need to pay particular attention to workers compensation insurance. There are many other specialisms that require their own approach to insurance, and no doubt if your business has its own needs you can imagine what they are.

The ideal is often to combine the general and the specific. Buy a general policy that covers all the 'generic' aspects of your business, and a separate policy to cover the specifics that will demand extra treatment. You can get this special policy either from the same insurer responsible for your overall business insurance, or from a different insurer. The one risk you'll need to be aware of is that of paying twice. You don't want to be paying the premiums for two sets of business insurance, both covering the same area - because you'll probably only be able to claim under one of them. This kind of hybrid isn't always the best choice - there is no universal right answer to business insruance - but it's a good start.