What happens when your business is faced with a lawsuit that comes out of nowhere? The key to protecting your business is to always have a plan in place should the unthinkable happen. This will be your business insurance.
There are plenty of business insurance plans out there, and your business will need a variety of them to remain protected. This guide will tell you all you need to know about insurance coverage for your business.
What Is Business Insurance?
Business insurance refers to a contract between your business and the insurance company. This agreement ensures that you are financially protected when unfortunate circumstances occur. The exact level of coverage will depend on the type of insurance you need and the terms of your policy.
Why Do You Need Business Insurance?
Business insurance can sometimes seem like an unnecessary expense. It may not be used very often and adds overhead expense, but the following reasons will show you why the costs are necessary.
They Protect Your Finances
It’s impossible for your business to be fully aware of the financial hit that can be caused by an unexpected event. How can you anticipate a slip and fall incident, or its’ costs, for example?
A lawsuit can come out of nowhere, and you may not have the financial wherewithal to deal with legal defense and investigative costs. If found liable, you may also have to bear the cost of compensating the affected party. These costs can add up and become quite damaging to your company.
A business can only function when it has consistent and full access to its’ financial resources. This enables the business entity to grow and pay the day-to-day operating expenses. If a loss were to occur without insurance coverage, you may end up having to shut your doors.
Proper insurance coverage prevents this from happening. The insurance company will bear most, if not all of the costs arising from these unfortunate events. This protection allows your company to continue operating and growing not if, but when, an unforeseen event occurs.
Protect Your Reputation
Lawsuits damage your company’s credibility, no matter what caused the legal dispute in the first place. If you don’t have insurance carrier legal defense to investigate, you will have to bear the brunt of a tarnished reputation with no way to recover from it. Even for those that might consider self insuring, do you really want to foot the bill for something out of your control, or would you prefer to mitigate the loss with proper coverage? With proper coverage, your clients’ interests will be protected as well.
With an insurance plan, you can rest well knowing that if legal claims arise, you will be defended in court and reach a suitable settlement. In cases of data breaches and lost client data, the insurance company can also provide the necessary financial compensation to provide data recovery help along with providing monitoring services for those affected.
Types of Business Insurance
There are plenty of business insurance plans out there that provide coverage for different aspects of business risk. These are some of the plans you should consider getting when running a business.
Public Liability Insurance
What happens if a customer visits your premises, slips on a wet area, and gets injured? Worst-case scenario, they can file a lawsuit against you.
Public liability insurance financially protects against property damage or physical injury caused by your products or services. This coverage extends to your employees as well.
This insurance policy will not just cover the financial compensation for damaged property or medical bills. It will also provide financial protection for your legal defense costs.
Professional Indemnity Insurance
Mistakes are part of everyday life. However, what happens if your mistake occurs in a professional setting and results in your clients losing money?
If your job or business involves providing professional advice to clients, these professional mistakes can cost a lot. As a result, your clients may pursue legal claims against you.
Professional indemnity insurance is a type of business insurance that covers professional services. This can include professions such as consultants, accountants, chiropractors, lawyers, and more.
The insurance compensates for cases where you have to defend yourself against claims regarding your professional service. This insurance, however, will exclude cases where your actions were a breach of your professional duties.
Holding this type of business insurance will be essential in reducing your firm’s vulnerability to legal disputes. It can also win you more clients because it shows that your firm takes the work that you do seriously and will attempt to prevent any damaging mistakes.
Cyber Liability Insurance
We live in an age where most business activities can take place online. While this arrangement is highly beneficial, it can also expose your business to different types of risks. One of them is cyber attacks.
Whether you are a large corporation or a small business, a cyber attack will be heavily damaging to your company. A data breach can result in ineffective computer systems and lost information.
This will interrupt your business proceedings. Even worse, they can result in the leakage of your customers’ sensitive information.
Protecting your business with cyber liability insurance has never been more important. This coverage provides financial support for costs arising from the following scenarios:
- Loss or theft of important client information
- Interrupted business proceedings
- The investigation process
- Recovery of data lost during the breach
- Extortion compensation
- Any fines and penalties
- Costs incurred when trying to restore your business reputation
- Legal costs because of any legal claims from your clients against you or your company
The costs of a cyber breach are high. Having an insurance policy that protects you can go a long way in ensuring your business can continue to run after this unfortunate event.
Management Liability Insurance
Business management is a difficult position to hold, and the decisions you make can expose you to a lot of risks. This is where management liability insurance can be helpful. This coverage is also known as Professional Liability, E & O or D & O for directors and officers coverage. This insurance coverage protects the leaders of your company, such as your managers, directors, and more. Mismanagement liability usually arises because of the following scenarios:
- Defamation
- Breach of professional duties
- Claims regarding unfair dismissal
- Sexual harassment claims
- Employee theft and fraud
The insurance plan will typically cover costs regarding investigating, defending, and settling any claims with the opposing party.
Commercial Vehicle Insurance
What happens if an employee of yours is driving the company’s car and got into an accident? The legal claim can impact not just the employee but your company, which is why you should have a commercial vehicle insurance plan.
This insurance protects any liabilities that arise from accidents involving your business vehicles. This can include delivery trucks, forklifts, company cars, work vans, and more. It also includes personal vehicles if you were using them for a business purpose.
Your commercial vehicle insurance offers coverage for the damages to the vehicle and the drivers. This includes repairs, medical costs, lost wages, and personal injury legal claims against your company because of the accident. If the driver is uninsured, your insurance company can also provide financial compensation for them.
Business Interruption Insurance
What happens if your business is suddenly interrupted because of events that are out of control? For instance, your headquarters may be damaged in a natural disaster. Or, you are unable to provide your business services because of the COVID-19 pandemic.
This period of time shows how important it is to have business interruption insurance. This policy will provide financial coverage for the ongoing costs of your business.
These costs include the following:
- Ongoing expenses such as electricity and rent
- Expenses arising from the need to temporarily relocate to another location in order to operate your business
- Having new training sessions because of business transitions or to operate replacement machinery
- Closing your business under short notice
- Damage to a supplier’s premises
The main purpose of the business interruption insurance plan is to maintain a business’s profit margins. Even when they cannot operate because of circumstances that are beyond their control, they won’t go bankrupt.
This is especially important in cases of prolonged business interruption. This is what is happening because of pandemic lockdowns. Without this insurance protection, a small business may find the ongoing costs too overwhelming and may have to close its doors permanently.
Business Insurance Is Essential to Run a Company Well
Some business leaders may consider business insurance as an optional thing, but it shouldn’t be. Different types of business insurance are essential in protecting your finances, your professional reputation, and the survival of your company.
It’s not enough to have one type of insurance plan. To be adequately protected, you have to consider the different risks your company is always exposed to and prepare for them.
Contact us today to find a suitable insurance policy.
