How Are Employers Covered By Business Insurance?

Insurance was a scheme devised to help people protect themselves from risky ventures. While we might not think of owning a vehicle as a “risky venture,” tens of thousands of people die in wrecks each year — and that makes it a fair risk for personal injury or financial loss. And there are many different types of insurance ranging from pet insurance to business insurance. There is no greater risk than starting a new business. It’s hard work. Success is not always guaranteed. So why should business owners insure themselves, and what does business insurance cover?

Business insurance usually consists of general protections to guard against natural disaster, property damage, lawsuits, and “shrink” (which is profit loss due to product damage or theft). It comes down to liability. In many cases the business owner is liable — but can buy insurance to offset those liabilities. 

Depending on the type of business insurance, the owner might have legal or financial options if an employee reports discrimination in the workplace. In order to maintain coverage, an owner would likely be asked to exceed state and federal regulations on discrimination by offering extensive training courses and workshops designed to further mitigate the risk of these types of reports by employees. 

Many entrepreneurs will purchase a Business Owner’s Policy (or BOP). These policies combine several different types of coverage, including property protection, general liability, and business income protection. BOPs are popular because they represent a deal — entrepreneurs can save money on one type of coverage by combining it with many other types of coverage. The more protected, the more you stand to save if the worst happens (and the less you spend on the insurance itself).

A BOP will help protect an owner against other claims as well, frivolous or not. Sooner or later, a customer will likely report sustaining an injury in your store. This is an inevitable consequence of running a business. If you need to fight the claim in court, the business coverage will help offset the costs of hiring a lawyer and making a case. The same type of coverage protects against customer claims that you falsely advertised a product or service.

Many business owners will want business income insurance, which will protect against losses sustained due to closure. The reasons for such a closure might include natural disaster, theft, or another kind of unforeseen damage. 

If your business involves greater-than-normal bookkeeping (if you own a law firm, for example), then you will likely want to obtain professional liability insurance to protect against a client who makes the claim that a small clerical error cost him money. The important thing to remember is this: making a mistake is all that is necessary for a costly lawsuit. It doesn’t mean you did something wrong. These suits can still be costly if you don’t have the appropriate insurance.

Workers’ compensation insurance — not to be confused with actual workers compensation — is insurance that guards against losses incurred because an injured employee can’t work (because they’re out on workers comp and cannot be easily replaced!).