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Small business insurance: what it is and what it covers

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Small business business insurance helps protect a business’s assets, property, and income. A business owners policy (BOP) is the most common policy for small businesses, according to the Insurance Information Institute . A business owner’s policy usually includes three basic types of coverage that help protect a business: business property coverage, general liability coverage, and business interruption coverage.

If you are a small business owner, you may also be able to purchase additional insurance coverages to customize your policy based on your specific operations and needs.

Woman working on computer in small business.

WHAT DOES SMALL BUSINESS INSURANCE COVER?

Depending on the coverage you choose, a business owners policy helps protect your business against things like financial loss and covered perils. Covered perils may include theft, fire, wind, falling objects, and lightning. It is important to read your policy documents carefully to understand what coverages are included and what perils are covered by your insurer.

Each coverage in your business owners policy has a coverage limit . A limit is the maximum amount your insurer will pay for a covered claim. It is also important to note that each coverage in a policy is normally subject to its own limit.

And that some coverages could have a deductible . A deductible is the amount of money you pay out of pocket for a covered claim.

COMMERCIAL PROPERTY COVERAGE

Property coverage in a business owners policy helps protect your business building and its contents from covered perils. For example, if there is a fire in your commercial building, a business owner’s policy can help pay for repairs to the building (if you own it). This coverage also helps replace business assets, such as office furniture, computers, and machinery.

Please note that commercial property coverage will be subject to deductibles and limits. Typically, you can choose your property coverage limits based on the estimated cost to repair, rebuild, or replace your business property. But, if your losses exceed the coverage limit you’ve elected, you’ll have to pay out-of-pocket to complete repairs to the building or to replace your business property. It is important to note that having insufficient policy limits may result in a penalty. This is a penalty you would have to pay for not buying enough insurance. To help avoid penalties, be sure to purchase enough insurance to cover your business and its contents.

COVERAGE AGAINST GENERAL CIVIL LIABILITY

A business owners policy typically includes general liability (sometimes called commercial general liability, or CGL) coverage. If a customer or visitor is injured at your business, and you are found liable, general liability coverage may help pay for the injured party’s medical expenses. It could also help pay for legal costs if you are sued for an accident that occurred within your business.

Commercial general liability insurance is also subject to a coverage limit. That means if an injured person’s medical bills exceed your coverage limit, you may have to pay out-of-pocket to cover the rest.

BUSINESS INTERRUPTION COVERAGE

Business interruption coverage *, sometimes called business income coverage, is also usually part of a business owner’s policy. This coverage helps replace lost income and additional expenses if a covered peril affects your business.

For example, suppose a tornado or fire renders your office uninhabitable. Business interruption coverage can help pay for rent in a temporary office while repairs are made. Business interruption coverage may also help replace business income lost due to the covered peril. Like other coverages in a business owners policy, this one will be subject to a limit. It may also be subject to a period of time. This means coverage might only last 6 months, for example, so be sure to ask an agent about specific limits.

ADDITIONAL COMMERCIAL INSURANCE COVERAGES

There may be additional coverages you can add to your business owners policy. Some available coverages may include:

  • Errors and Omissions Insurance * (also known as Miscellaneous Professional Liability Insurance)
  • Data compromise coverage *
  • Business auto insurance *
  • Coverage against civil liability for contracting practices *
  • Equipment breakdown coverage *
  • Outdoor property coverage *

Talk to your agent about your specific business insurance needs, so they can help you customize your policy with coverages that might be useful for your situation.

HOW MUCH DOES COMMERCIAL INSURANCE COST FOR SMALL BUSINESS?

The cost of a small business commercial insurance policy depends on many factors. These factors include the type of business you are insuring, the types of optional coverage you choose, and the deductibles and limits you select for each coverage. Get a small business commercial insurance quote or talk to an agent to get an idea of what you might pay for a policy.

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