Few things are more confusing than insurance. When searching for the perfect policy for your business, it’s easy to fall into a lot of traps and pitfalls. Instead of getting frustrated and signing onto a policy that may not provide the right amount of coverage, it’s important to understand what business insurance offers and what coverage you need.
General liability in the context of business insurance covers certain liability risks, such as if a client or guest suffers an injury from every day business practices. A business owners policy (BOP) combines liability coverage and property damage coverage into one policy. A BOP generally includes general liability as well as:
- Property Damage Insurance: This protects the physical aspects of the business from fire, hail, wind, theft, vandalism and other damages.
- Business Interruption Insurance: If a disaster makes business inoperable, this coverage provides compensation for the income lost during that period of time.
Depending on the industry, your business may be required to carry liability insurance. While property insurance isn’t usually state-required, it’s crucial to protect your assets in case of disaster. Losing one store or warehouse can set the business back thousands of dollars or even drain the bank completely. A business owners policy is a good idea for small businesses who need both general liability and property coverage.
Other coverages not covered by a BOP that businesses should invest in include:
- Workers Compensation: Workers compensation is required across the U.S. for businesses with employees. Whether you have a small business or large business, you need workers compensation in case an employee gets injured on the job.
- Commercial Auto Insurance: If your business uses vehicles for work besides commuting, you may need commercial auto insurance. This provides car insurance coverage specifically for vehicles used by the business and can be expanded to employee’s personal vehicles, as well.
- Professional Liability: Professional liability is different than general liability. Professional liability provides coverage in case a mistake on behalf of the business causes a client to lose money. For example, if an investment specialist provides poor advice and their client loses money by following said advice.
- Umbrella Insurance: You can add an umbrella policy to your BOP for extra liability coverage. This insurance steps in once your other liability coverages hit their limit. For example, if you owe $12,000 in bodily injury liability but your policy only covers $10,000, your umbrella policy will pay the leftover $2,000. This insurance is especially important for industries where lawsuits are frequent or likely.
How Much Does General Liability Cost for a Business?
Insurance costs are influenced by many aspects of a business, including the industry. General liability costs a median of $500 a year. Small businesses generally pay $300-$600 a year for general liability, but high-risk industries such as construction can pay around $825 a year.
How Much Does a Business Owners Policy Cost?
A business owners policy also depends on varying factors. On average, businesses pay an average of $1,200 a year at anywhere between $500-$3,500 a year.
What Affects Business Insurance Prices?
Both general liability and business owners policies are subject to the same factors. Influences on business insurance premiums include:
- Size of the business
- Industry
- Location
- Claims history of the business
- Credit history of the insured
- Number and type of vehicles insured
- Amount of coverage
A business owners policy is typically most effective for small businesses. The requirements of a small business change per state and per industry, but generally employ 50 people or less. Speak with an agent today about insuring your business.