There are some differences in business insurance requirements around the country.
For example, New Jersey business insurance has to include worker’s compensation and commercial auto coverage, at a minimum, while in Texas, by comparison, worker’s comp isn’t required.
While there are particular differences in what’s required depending on where you’re doing business, there are also some similarities and things every entrepreneur should know, no matter where they are.
The following are six important things to know about business insurance.
Business insurance protects you from financial loss that could come from a number of unexpected events like property damage, loss of income, theft, employee injuries, illnesses, and lawsuits.
If there’s damage or injury, business insurance covers you partially or fully for your costs.
Sometimes, business insurance is referred to as commercial insurance.
Both are umbrella terms. They’re not actually names of a specific policy but instead include several types of policies.
Business insurance helps protect your assets, which can include not only your physical property but also your intellectual property.
If you’re a small business owner, you need to be especially mindful about evaluating your specific risks and making sure you’re covered because you probably have more personal financial exposure if you sustain a loss of any kind.
Some of the key types of business insurance to consider include the following:
No matter the size of your business or what you do, you’re probably going to need at least some level of protection from insurance. Even as a sole proprietor, you have to consider the risks that are unique to your business and how you can best protect yourself.
Specific situations where you especially need to ensure you’re covered include:
It’s important, as is true with any insurance, that before you buy protection for your business, you shop around and compare. Commercial insurance providers use algorithms to determine risk, and they can actually give some pretty varied prices for the same inputs and information.
You could find substantially cheaper rates simply if you shop around. If you already have business insurance and you don’t necessarily need to change your level of coverage, you should still plan to comparison shop every year.
There’s something called a business owners policy that might be available to you or a BOP. A BOP will combine different types of protection into one plan, and you’re often going to get a lower price than if you got each type of coverage separately. It might, for example, include business interruption, property, and some level of liability protection.
You do need to be careful if you’re choosing a BOP because a lot of them don’t include professional liability insurance or auto insurance, and worker’s comp is almost always going to be separate.
There are different kinds of bundles too. You might, for example, be able to bundle your personal insurance, like your homeowner’s policy, with business coverage.
Finally, is it illegal to operate a business without insurance? The only real answer is that it depends.
You have to find out what your state requires to be legally compliant. In most states, for example, if you don’t have worker’s comp, you can be fined and face penalties. You’d also likely be responsible for paying out-of-pocket for the medical care of your employees if they had a work-related illness or injury.
It’s not really about legality when it comes to business insurance, though—your business could end up losing everything, and you could personally as well if something unforeseen happened and you didn’t have appropriate coverage.
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