Small business insurance is not just advisable – it is necessary. A small business owner faces too many threats to their livelihood on a daily basis to go without at least minimal coverage. State law may also require some businesses to hold certain types of insurance, such as workers’ compensation. Workers’ comp is required in Sioux City, Iowa and every other state except Texas.
The business owner’s policy, or BOP, is the most common type of insurance held by small and medium-sized businesses. A BOP combines property and liability insurance. Although, it is further tailored to suit the specific needs of the business which holds it.
For example, both a restaurant and an accounting firm need a BOP that covers their place of business in the event of theft or fire, but only the restaurant would need additional liquor liability insurance. This is because accountants do not serve alcohol (as much as it might help some of their clients during tax season).
An insurance advisor will determine whether their commercial client meets the criteria for a BOP. But even if they do not, most small businesses still need a minimum of three separate insurance policies.
Insurance Policies All Small Businesses Should Have
Listed below are the three insurance policies that small businesses need.
- Commercial property insurance covers a business’s physical location in the event of fire damage, water damage, theft, or other destructive events. It also covers the items which are essential to that business such as its tools, furniture, inventory and materials. For example, a machine shop’s property insurance would cover the shop itself, its various machines, and its bar stock.
- General liability insurance protects a business from lawsuits. The claimant may sue over a defective product, damage to their own property as the result of negligence, or an injury sustained on the business’s premises. (The hot coffee lawsuit is perhaps the most famous example of a product liability claim made against a business.) Liability insurance covers damages, attorneys’ fees, and possibly medical bills.
- Workers’ compensation insurance takes care of an employee who incurs a work-related injury or illness. It is important to note that not all work-related injuries occur suddenly. A repetitive strain injury may take years to develop. Plus, exposure to certain chemicals may only cause certain illnesses years following the employee’s retirement. Workers’ comp averts a disastrous lawsuit by covering an employee’s medical bills, disability benefits and more.
Additional Commercial Insurance Policies
In addition to property, general liability and workers’ comp, a BOP may include several other types of commercial insurance policies. The policies are as follows:
- Business interruption insurance compensates for lost income resulting from damage caused by fire, flooding, wind, hail, theft and other disastrous events. It is important to distinguish interruption insurance from property insurance, as the latter only covers the property itself – not the income it generates.
- Business auto insurance is necessary for any company which owns, rents or leases vehicles. As well as those which require their employees to drive their own cars for their jobs. It covers damages caused by collision and other accidents. Its importance cannot be overstated in the Midwest, especially Sioux City, Iowa, where the weather is so inclement.
- Professional liability insurance covers damages resulting from an employee’s negligence or mistake. Unlike general liability insurance which commonly compensates clients for direct injuries or property damage, professional liability insurance comes into play when an employee has made a serious error or omission. An example would be a caregiver who fails to administer medication to their patient. Or a financial advisor who gives such poor financial advice that it constitutes negligence.
- Products-completed operations insurance provides protection from lawsuits that allege injury or property damage resulting from a business’s products or services – even when they are not necessarily defective. A ladder manufacturer is an excellent example of a business that cannot do without this type of insurance.
- Key employee insurance protects businesses that would suffer severe financial losses if one of their most important team members were to become injured, disabled or otherwise unable to work. An architecture firm that has one architect certainly has a key employee and would need this insurance.
- Umbrella insurance covers the entirety of a small business’s assets with the addition of a single policy. Umbrella insurance extends beyond what the other policies are able to cover, thus protecting the business even from unusually large lawsuits.
Choose the Right Small Business Insurance in Sioux City
This list of policies is far from exhaustive. Just as there are many types of small businesses, so too are there many types of specialized insurance policies. Sorting out precisely which policies your small business needs may seem daunting – until you’ve engaged the right commercial insurance agency.
The Hoffman Agency has insured small businesses in Sioux City and throughout Western Iowa for the better part of one century. Whatever your business’s size or specialty might be, we are qualified to tailor the ideal and all-encompassing insurance package for it.
Your livelihood deserves no less than the very best protection. That is why we welcome you to contact us. We can help safeguard your life’s work.