Business insurance may seem like an added expense that isn't absolutely necessary, and therefore not essential to obtain. This is usually a mindset found in those business owners who don't understand the purpose and benefits of business and general liability insurance, professional indemnity insurance and product insurance. If we take a look at each of these insurance types, not only will you determine what is most relevant, but it will become clearer why we recommend that all businesses invest in insurance.
Different Types of Business Insurance
To avoid the financial collapse of your business, insurance can be purchased to protect you and any lenders from loss. That loss can be related to employees or property. It can also be used to provide protection from personal liability when the owner is found negligent or to have caused harm or damages to business assets, whether people or equipment.
One type of business insurance is property insurance which protects the building and its contents from various circumstances, including natural disasters, fire and theft. It even covers the cost of damages made by tenants or guests to carpets, furniture and other items. Property insurance can be purchased regardless of whether you rent the location or own it. Any business with property that is tied to investors, loans or business viability needs property insurance.
Business Liability Insurance Protects From Injury Claims
The other important business insurance is general liability insurance. This product promises coverage for any type of bodily injury, property damage or personal injury that occurs on your property. It even protects against claims that advertising has caused injury to a customer. Liability insurance is often required by lenders to protect their interests and prevent collapse of the business due to outside insurance claims. A business that exposes clients or guests to equipment or property that could lead to injury must invest properly in liability insurance. Some states even require it.
Professional Indemnity Insurance Protects From Negligence
Professional Indemnity Insurance is specific to service oriented businesses. It provides protection from “errors and omissions” (E&O) claims that cost to defend in court. Also known as Professional Liability Insurance (PLI), it ensures that clients who cite negligence in the order of service provided can not drag the business into bankruptcy or total demise. It does this by covering the costs of court and settlements, if necessary. It is considered the best source for risk management in any industry that relies on a service oriented approach.
This type of insurance is often found in the medical and legal fields, but also in construction, insurance, business consulting, and financial sectors. For the medical profession, it is more commonly known as malpractice insurance, while lawyers and insurance agents refer to it as E&O insurance. Professional Liability Insurance is the common name for companies offering services like accounting, engineering, construction, and other financial services.
If you are in the process of incorporating your business, then take the time to understand the business liability, product and indemnity insurances we have outlined here. To do any less would be to put your business at risk of loss or lawsuit, either of which could be devastating to your venture.