9 Crucial Types of Business Insurance Every SME Should Consider

Types of Business Insurance

Types of Business Insurance

Success in business will always require a sizable amount of risk-taking. But even with your valiant approach, it’s also important that you put effort into avoiding other risks. Risks such as falling victim to theft, natural disaster, or being on the receiving end of an unfavorable legal judgment.

Your business also needs protection against negligence claims. If your business is found liable for negligence, you may be required to pay compensation to the injured party to cover medical expenses, property damage, lost wages, and other related costs. Negative publicity and word-of-mouth can also lead to a damaged brand image and decreased sales.

Such potential threats, while they often crop up unannounced, can be effectively mitigated by purchasing insurance. Let’s look at the key types of coverage you need in that regard.

  • Public Liability Insurance

This is coverage for any claims that might be filed against your business by the public. Any reputable company like insurance brokers Hamilton would be able to provide more details on this for their customers and precisely what is covered by this insurance.

Specifically, public liability insurance covers any harm, injuries, and losses incurred by a member of the public while they’re inside your premises. ‘Member of the public’ here means anyone who’s not directly employed by the business; think customers, visitors, delivery personnel, and other third parties in general.

Public liability insurance is meant to cover costs arising from:

– Bodily injuries like slips and falls on the company premises

– Property damage in the case that the victim’s personal belongings get destroyed.

– Legal action: If the person decides to sue, your PLI cover will foot the legal bill.

Public liability insurance can be a bit of a minefield to purchase, and therefore it’s best to read resources like this insurance analysis post or, even better, speak with an agent to get the right cover. Ask a broker with the necessary experience in your specific field so that they are able to give you the very best expert advice before you make a decision.

When choosing public liability insurance for your business, it’s essential to consider a series of crucial tips to ensure comprehensive coverage and protection. Begin by evaluating your business’s specific risk exposure and potential liabilities. This initial assessment helps determine the appropriate level of coverage needed to safeguard your business’s interests effectively.

A key aspect to focus on is the coverage limits different insurance policies offer. Ensuring these limits adequately address potential claims is essential for your peace of mind and financial security. Delve into a clear understanding of the types of incidents and claims the policy covers. This knowledge will allow you to align the policy’s offerings with your business’s unique circumstances, ensuring that you are adequately protected across various scenarios.

While exploring coverage, pay close attention to any exclusions or limitations outlined in the policy. These are situations or circumstances that the insurance may not cover. Identifying these exclusions can help you anticipate potential gaps in coverage and make informed decisions about the policy’s suitability for your business.

  • General Liability Insurance

Commercial general liability coverage is designed to protect against claims made by outsiders against your business. These claims usually result from normal business operations. The insurer covers both the victim’s losses and the cost of resolution.

It’s worth pointing out that GLI isn’t the same public liability insurance. Some insurers include coverage for third-party injuries as part of general liability. But GLI, by definition, will usually encompass a broader range of issues, including:

Reputational Harm: General liability may cover claims resulting from slanderous business activity (as determined by a court of law) and other things like malicious prosecution.

Advertising Injuries: If your ads are found to be invasive to one’s privacy or in violation of copyright laws.

In a nutshell, general liability provides a superior level of coverage compared to PLI — although the latter covers the kind of claims you’re more likely tFquo face. So do check that your GLI includes public liability, or else sign up for a separate PLI policy if that’s not the case.

  • Product Liability Insurance

Any business that deals in tangible products should consider getting product liability coverage. This takes care of claims pursued by customers for losses resulting from the use of defective or substandard products. It can be part of your general liability cover, but experts recommend taking out a more-specific standalone policy.

For one, a separate policy can be tailored to cover the entire life cycle of the products. This would cover every scenario from the production line to your supply chain. Customers can sue for a whole range of issues here, from bad design and manufacturing defects to poor labeling and packaging. 

Even if your business wasn’t to blame, you’d still have to part with legal fees before the courts can determine that. Product liability insurance will help you avoid such unnecessary expenses. Some of these cases could become long and drawn out, incurring even more costs as the process progresses. So, companies would want this type of insurance to give them peace of mind in such situations.

We should also highlight that this type of coverage is within reach of most businesses. A typical policy costs about 25 cents for every $100 made in sales, so your annual premium will likely be in a 3-figure territory. It’s a small price to pay for the assurance and protection.

  • Professional Liability Insurance

Also known as professional indemnity insurance, or errors & omissions insurance, this is designed to protect businesses from client dissatisfaction. It steps in when a customer seeks redress for abysmal service provision; this can range from offering poor advice to failing to meet a deadline, to mistakes and oversights that result in losses, and so on. 

Professional liability insurance covers legal fees, damages, and other costs resulting from such claims — everything short of criminal penalties, basically — subject to the policy’s specified limit.

Although any service provider strives to give their best to each customer, there could be instances where things don’t go as planned. Even when the company does its best, the circumstances could be less than optimal for completing the job perfectly.

This type of insurance has traditionally been associated with specialized service providers (therapists, architects, attorneys, real estate agents, etc.). Still, you might want to consider taking out professional liability coverage if you:

– Are entering into a contract with a client (e.g., after qualifying for a tender).

– Frequently extend advice to your customers: Even recommendations can be interpreted as advice.

– Offer additional services on top of your products (e.g., installation).

  • Data Breach Insurance

Most SMEs nowadays gather data in a bid to stay on top of market trends — information that’s in high demand among cyber-criminals. So it’s an understatement to say that data breach insurance is crucial. As the name suggests, this coverage provides the funds you need to clean up after a data breach, covering the cost of:

– Alerting the affected persons

– Helping victims keep watch over their finances

– Engaging a PR firm to restore public confidence

Your insurer might also include consulting services to fortify your databases against cyber-attacks. Most countries and regions worldwide will have specific rules, regulations, or laws regarding protecting personal information. If the company fails to adhere to these adequately, it could result in a hefty fine or even jail time.

  • Worker’s Compensation Insurance

Colloquially known as worker’s comp or ‘workman’s comp,’ this covers your employees from job-related accidents, ailments, and even death. It covers a portion of lost wages, plus the cost of treating injuries/illnesses suffered by an employee whilst going about their workplace duties. Worker’s compensation is a legal requirement in most jurisdictions, and penalties for non-compliance can be hefty.

Even if your state is among the few exceptions, it’s in your best interest to be insured, nonetheless. A simple slip-and-fall mishap can result in expensive claims, and you’ll be on the hook for the entire cost if you’re not insured. Worse still, the affected employee could take you to court if they feel shortchanged.

Worker’s comp coverage is designed to prevent such messy eventualities. Not only will your insurer foot the bill, but your staff will also forfeit the right to pursue legal action once you’re subscribed.

  • Commercial Property Insurance

Unlike the other types of insurance we’ve seen so far, this one is meant to indemnify damage suffered directly by your business. Commercial property insurance is designed to cover your entire premises; the building itself, furniture and tools, as well as inventory. Although it’s not legally required, it is nonetheless a must-have for any business that operates from a physical location.

By definition, commercial property coverage insures against losses arising from a wide range of events, vandalism, fire, and flooding, just to provide a few examples. We must, however, highlight that not all policies are created equal. Be sure to check which particular scenarios are covered before signing the dotted line and consider taking out additional coverage for the ones that aren’t.

  • Business Interruption Insurance

Any event that leaves your premises in ruins will also leave your business crippled. In most cases, you’ll be unable to conduct normal operations until restoration work is complete. That translates to a significant amount of lost income.

And it’s for this reason that you’ll want to take out business interruption insurance on top of your property coverage. This policy will step in when disaster strikes and leaves you incapacitated, covering lost revenues to avoid a huge deficit on your balance sheet. Some insurers will even take care of losses resulting from lawsuits — check with yours to see if they can extend this kind of coverage.

  • Commercial Auto Insurance

This is yet another type of business insurance that protects your assets. Specifically, auto insurance covers all the vehicles your business relies on during the course of operation; company cars, delivery vans/trucks, and what have you. 

You’ll want to purchase coverage even if these vehicles are leased or rented. Ditto if your employees use their own cars for company business — besides commuting to and from the workplace, that is. Commercial auto insurance like, OTTIS Insurance will afford protection for situations that are outside the owner’s (employee’s) personal policy.

Making The Final Choice

Depending on the type of services a company offers their clients and their operational requirements, businesses must ensure that they have cover for a wide range of incidences they could come across. A reputable insurance broker’s expert opinion could help a company decide which cover to have, making it much more straightforward and less complicated. So, contact one before choosing the insurance plans for your business.

About Aditi Singh 351 Articles
Aditi Singh is an independent content creator and money finance advisor for 5 years. She is recently added with Investment Pedia. Internet users are always welcome to put comments on her contributions.

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