7 Types of Insurance Every Business Owner Needs to Prevent Losses

If you own your own business, you’re in a select group. Estimates differ, but somewhere between 10-16% of Americans own businesses.

Owning a business can be difficult, and a lot goes into it. Not only do you have to figure out who to hire, how to handle records, and figure out how to keep things afloat, you also need insurance.

What kind of insurance do you need, though? What are the different types of business insurance and why are they important? We’ll answer those questions in the paragraphs below.

Watch our video summary below:

1. Business Liability Insurance

Of all the different types of business insurance, one of the most essential is business liability insurance. This basic type of insurance is designed to protect your company should anything happen to a client or other third-party because of your products or policies.

You may wonder why you need this, especially since you don’t have any intention of hurting anyone. Sometimes, you don’t have to. Incompetence and even product tampering can happen at any level, and will always have consequences.

If you lived through the 1980s, you may remember something known as the Tylenol Poisonings. Back in 1982, somebody could slip poison into various Tylenol capsules after they left the factory, resulting in several deaths.

Nobody ever found out who the perpetrator was, but it left the nation reeling and changed the way we sell various products.

There are also insurance fraudsters to worry about, and the small chance that something harmful slips under your radar and makes it to market.

2. Product Liability Insurance

Much like business liability, product liability insurance protects you in case your product harms someone or damages their property.

It differs from business liability because it’s more specific. While business liability can include everything from a faulty product to slipping on a wet floor while walking through the store, product liability is more specific.

Product liability protects the businesses in cases where a product is responsible, or is believed to be responsible, for the incident that occurred.

This case can ruin a small business, even if you aren’t found responsible. That’s because the legal fees in these cases can mount, and you may have to pay them even if you win.

3. Business Interruption Insurance

Business interruption insurance helps to cover your business from a natural disaster. Natural disasters can wreak havoc on a business, and you may even have to repair or rebuild your store.

When this happens, it will put your business on hold, which eliminates one source of income, perhaps your only one. Business interruption insurance helps to cover some expenses until you can get your business running again.

The bad news is that it doesn’t always cover everything, and many businesses go under despite insurance. You can help remedy this by having a disaster plan in place and investing in a building that’s better at withstanding extreme weather.

4. Commercial Auto Insurance

If your businesses use any company vehicle, insuring it is an absolute must. Commercial auto insurance protects the company in case of a crash.

Note that this insurance only covers company vehicles. If your business doesn’t have a company car or your employees carry out business in their own cars, commercial auto isn’t necessary.

It also isn’t necessary if you use third-parties to carry out tasks, because commercial auto doesn’t cover third-party vehicles.

5. Property Insurance

Property insurance covers various types of damage done to a business, including certain weather events. However, floods, earthquakes, and other natural disasters are generally not included.

Not only does it cover the business itself, but it also covers many forms of property inside the building. For instance, tables and chairs would be covered if a restaurant was damaged.

6. Workers’ Compensation

While every business owner wants to keep their employees safe, it isn’t always possible. Even the best chefs cut or burn their hands sometimes. People who have climbed up a ladder 99 times can still slip on their 100th. Delivery drivers can still get in accidents even if they’re doing everything right.

There’s nothing wrong with doing what you can to keep your employees safe and happy. We’d even encourage you to do that, but don’t assume that everything is under your control. 

This is where workers’ compensation comes in. It provides employees with the money to provide an income for their family while also paying for medical bills incurred because of the injury.

7. Cyber Risk Coverage

It seems like hackers are getting smarter every day, and that’s definitely bad news for the business world. If you want to protect your clients’ information and even your own, you will need cyber risk coverage.

Cyber risk coverage helps reimburse any money lost through the cyber attack itself, or through repairing it. This is especially good news because a successful cyber attack often costs thousands in cleanup.

Different Types of Business Insurance & Why You Need Them

There are many different types of business insurance out there. We’ve covered many of the important policies in the paragraphs above, but there are plenty more out there. We encourage you to do more research on your own if you’re interested.