There are 10 types of business insurance you should consider for liability, cyber, property, employee and management risks at various stages in the life of your company.
10 Types Of Business Insurance
The following are ten types of business insurance you may want to consider for your company, and how they protect you from business risks at various stages of you company’s development.
- Property Insurance
- Commercial General Liability Insurance
- Umbrella And Excess Liability Insurance
- Cyber Insurance
- Product Liability
- Business Auto Insurance
- Workers Compensation Insurance
- E&O Insurance
- D&O Insurance
- Representations And Warranties Insurance
1) Property Insurance
Property insurance is first party coverage that protects your business’s assets and its income.
There are three types of property insurance forms, each covering a greater number of “perils” or causes of loss:
- Basic: The basic form covers 11 perils including fire or lightning, smoke, windstorm, hail, explosion, riot or civil commotion, aircraft and/or vehicles (striking the property), glass breakage, vandalism and malicious mischief, theft and volcanic eruption.
- Broad: The broad form includes all of the above, but adds the perils of falling objects, weight of ice, snow or sleet, accidental discharge or overflow of water or steam from within plumbing or related systems (does not include discharge or overflow of water from a sump), sudden and accidental rupture of heating, air conditioning, fire protective sprinkler, or hot water heating system, freezing of plumbing or related systems and sudden and accidental damage from artificially generated electrical current.
- Special: The special form, also known as “open perils” or “all-risk property” includes property insurance coverage for every peril unless it is specifically excluded in the policy. Perils that are typically excluded in the special form may include, but not be limited to, earthquake, flood, equipment breakdown and infestation.
At a minimum, you should have property insurance for your real estate, office furniture, any equipment held on site, while in transit or even held for others.
In some cases, property insurance may be bundled together with commercial general liability insurance in a business owner’s policy, aka “BOP”.
However, your business may not qualify for a BOP and your situation may call for a specific, dedicated property and general liability policy. Businesses that may not qualify for a BOP include solar installers and EPCs, solar developers and IPPs, insulation installers, energy storage companies, onshore wind and offshore wind developers and installers.
Every property insurance policy may have different terms and exclusions.
In some states property insurance will specifically exclude perils such as earthquake and flood, or such coverage may be required… For example, in California a specific earthquake endorsement must be added to the property policy to be covered for quake.
2) Commercial General Liability
Commercial general liability insurance, sometimes incorrectly referred to as “comprehensive general liability”, protects your business from third party claims related to bodily injury (BI) and property damage (PD).
These exposures may arise out of your premises operations exposures, in your ongoing operations, or your products and completed operations exposures.
An example of a common general liability claim is a “slip and fall” stemming the negligence of a property owner who fails to maintain a property that is accessible to the public.
Typically, the premises operations and products/completed operations limits will have the same primary and aggregate limits (for example: $1 million primary and $2 million aggregate).
3) Umbrella And Excess Insurance
Umbrella insurance provides additional insurance coverage above and beyond what is considered primary.
For instance, if you have a commercial general liability (CGL) policy with $1 million of per incident coverage and an aggregate coverage limit of $2 million, one claim of over $1 million in the course of a year or two separate $1 million dollar claims exceeding $2 million in total over the course of a year could leave you exposed with no additional coverage.
An umbrella policy addresses this exposure by adding another level of insurance above the primary limits. Umbrella coverage is often relatively less expensive per dollar of coverage than primary general liability limits.
4) Cyber Security Insurance
Cyber security insurance is used to protect businesses and individuals from risks related to Internet-related risks stemming from connectivity to online networks.
Network connectivity can include desktop, mobile and tablet devices that may be the target of attacks, including malware, phishing, ransomware, DDoS, hacking and other types of cyber crime.
Cyber insurance may include first party coverage of devices, systems, hardware and software New cyber risk coverages are being developed to protect buildings that may be exposed to attack or in danger of corruption.
If you regularly process and keep personally identifiable information, your business may need cyber insurance. The cost of cyber insurance and Cyber insurance may also include third party coverage for others who have been harmed by the errors and omissions or failure to properly secure personal data by service providers. may need cyber insurance.
5) Product Liability Insurance
Product liability insurance protects your business from claims related to products you make or manufacture. An example of a product liability claim would be a third party alleging that a product you manufactured was defective, causing bodily injury and/or property damage.
6) Business Auto Insurance
Business auto insurance protects vehicles used in the course of business because your personal auto policy does not provide coverage for vehicles used by your business.
Personal auto policies often contain business-related exclusions. If your employees use vehicles in the course of business uses vehicles, such as for food delivery, you should purchase a separate business auto policy to cover your business in the event of an accident that occurs while an employee is driving.
The ISO Business Auto Coverage Form describes what is considered a “covered auto”. Covered autos are defined by specific symbols, using the numbers 1-9 plus 19, designating the types of coverage included in the policy.
7) Workers' Compensation Insurance
Workers compensation insurance provides protections to your business and your employees related to injuries that occur in the course of employment. Workers compensation insurance is available across the 50 United States using a single “no fault” concept.
“No fault” means that employees give up the right to sue their employers and employers give up the right to common law defenses.
Oklahoma and Texas are the only states that are considered “elective” states where businesses are not required by law to have workers compensation in place.
Limits of coverage for workers compensation vary from state to state. California has a $1MM limit across the board… Whereas Massachusetts and New York are technically unlimited.
Are you a contractor located in New York? Learn more about the ins and outs of workers compensation coverage exclusions by learning about action over exclusions.
8) E&O Insurance
Errors and omissions, also known as E&O insurance, is a type of professional liability insurance. E&O may also be referred to simply as “professional liability”.
Professional liability protects you and your business from claims against you related to professional advice or guidance provided to clients in the course of your business.
Professional liability also protects you from omissions of such advice, terms or guidance where this information should have been provided.
9) D&O Insurance
Directors and officers insurance, aka “D&O, protects corporate officers and/or directors from claims against them for alleged errors and omissions that occur while they are working on behalf of a corporation or organization.
D&O may also cover claims that arise against the organization itself as a result of vicarious liability.
10) Representations and Warranties Insurance
If you are considering selling or buying a business, or divesting business assets, representations and warranties insurance (“RWI” or “R&W”) is a form of liability insurance that enhances the mergers and acquisitions process. In deals of a certain size (typically greater than $20 million), reps and warranties and increases your chances of closing the deal.
Larger transactions are excellent candidates for R&W1, however one size does not fit all… And reps and warranties coverage can be purchased to cover either the “buy side” or the “sell side” in a merger or acquisition.
Reps and warranties coverage results in making deals more attractive to both sides and more likely to close because, in exchange for a premium, reps and warranties insurance transfers risk away from the parties involved to an insurance company, thereby increasing velocity and reducing friction in important deals. Learn more about reps and warranties insurance.
Business Insurance Summary
The above descriptions cover only the basics.
If you are unsure if you need one or more of these coverages, but suspect you might, feel free to schedule an appointment with me and I will do my best to answer the questions you have.