Business Insurance FAQs

Large or small, running a business means taking on some degree of risk. As a business owner, you already have the passion and drive to take on new challenges, but you'll also need to protect the value of the assets you purchase for your company. Insurance can help you recover when things go wrong. From property losses related to items such as fire or theft, to liability issues should someone sue - or threaten to. With the proper policies in place, you'll gain peace of mind and feel more comfortable in your new role as an entrepreneur.

The cost of insurance is based on a range of factors including the following:

• The value of the company assets you wish to insure.
• Number of employees.
• Specific risks associated with your industry.
• Your personal risk tolerance and the amount of liability protection you prefer.

Many new business owners opt for what's known as a Business Owners Policy (BOP). This policy includes coverage designed specifically for small businesses. A BOP typically covers three major items: Property damage; business interruption and liability insurance. Larger businesses typically require a varied mix of insurance coverages.

In addition to the BOP, you may need other types of small business insurance coverage based on the kind of work you do, the size of your company and your location. These could include:

• Insurance for home-based businesses. Even if you work from home, you'll still need to insure your business. Generally, homeowner's insurance offers the appropriate coverage level for home based business-related property and equipment.
• Professional liability insurance. This may be required as a separate policy, in addition to the BOP, to cover losses related to liability claims arising from mistakes or lapses of professional duties. Businesses offering professional services to their customers will often purchase this type of policy.
• Commercial auto insurance. Company-owned vehicles will need to be insured through a commercial auto policy.
• Health insurance. As a self-employed person, you may need to provide health insurance for yourself, your family and your employees.
• Cyber insurance. Internet-based businesses or businesses that store their records online may need additional cyber protection against the risk of data breaches and malicious computer intrusions.
• Commercial umbrella insurance. Provides liability coverage beyond the basic business insurance policy limits in the case of a catastrophic auto or business related event.

As your business expands, you may outgrow the standard Business Owners Policy and require more protection. It's a good idea to review your insurance coverage annually and determine if any additional policies would offer a more beneficial level of risk protection.

Your agent can suggest a liability coverage that is optimal, based on company size and industry. The key is to make sure you have enough coverage if something goes wrong. Make sure to talk openly with us about your needs, and the associated costs, to help you make the best decision for your business.

As a business owner, you should always feel comfortable with the amount of insurance you carry. Insurance can help you recover from events that would otherwise threaten your company and reduce the likelihood of staying in business. The key is to ensure you understand the true value to repair or replace what you have.

The demands and opportunities your business faces are constantly shifting. The good news is that there are coverages available to adapt to your needs. As your business grows, offers new products or services, buys new equipment or develops new revenue streams, you may also take on new risks. It's a good idea to review whenever something significant changes, and at least once per year, to identify overlapping coverage or new areas of risk.

Business insurance is tax-deductible, as long as the coverage is for the purpose of operating a business, profession, or a trade. Businesses may not deduct their business insurance premiums if the coverage is for the purpose of a self-insurance reserve fund or a loss of earning insurance policy. Consult your tax professional for advice.

Business insurance is required by law, but only under certain conditions. The following business insurance is required by law if it is applicable to your situation:

• Unemployment insurance: Applies to a business that has employees and may be obligated to pay unemployment insurance taxes under prescribed conditions. If these conditions are applicable to your business, then you must register your business with the state work force's agency.
• Workers' compensation insurance: If your business has employees, you are most likely legally obligated to carry workers' compensation insurance, either on a self-insured basis or through a commercial insurance carrier or a state workers' compensation program. Workers' compensation laws vary by state.
• Professional liability insurance: Some states require specified professionals to carry insurance against professional liability.
• Disability insurance: Several states require that a business have partial wage replacement insurance coverage for eligible employees for non-work related injury or illness. These states are California, Hawaii, New Jersey, New York, Puerto Rico and Rhode Island.

If your business carries commercial crime/theft coverage, your business insurance will cover employee fraud and embezzlement.

There are several different forms of employee dishonesty coverage. You can purchase several types of fidelity bonds to protect the business in the event of dishonest acts by all employees, or by named employees.

In order for your business insurance to cover flood damage, your company must carry a separate flood insurance policy or endorsement. A typical commercial property insurance policy covers specific water damage situations but excludes flooding.

The wording and water damage exclusions vary from one insurance company to another. Be sure to review your policy carefully and discuss your specific risks and concerns with an independent insurance agent who can help you get the coverage you need.

Business insurance covers lawsuits, as long as you have the appropriate business liability insurance for your situation and enough liability coverage to pay your legal costs.

To ensure that enough liability coverage is in place for extreme circumstances like a lawsuit that exceeds $1 million in damages, many businesses buy a commercial umbrella liability policy.

Certain liability exclusions also apply, such as if an injury or damage was expected, or was caused intentionally. Some policies also have something called a "workmanship" exclusion, and some exclude coverage of punitive damages.
Liability insurance is available in many different forms, including:

• General liability
• Professional liability, errors and omissions and malpractice
• Directors and officers liability
• Product liability
• Premises or property liability
• Employers' liability
• Employment practices liability
• Environmental and pollution liability