From the very moment, any entrepreneur starts his business venture, he is exposed to certain risks and probable damages. They can cause tangible and intangible losses to a great extent. Many of such risks are present in most of the businesses as a part of the inheritance and inbuilt nature has guards of the business process. The businessmen both in his personal capacity and on behalf of his business entity are always vulnerable to incur losses due to uncertainties and adverse probable situation which are generally present in business operations. The need for business insurance is important because it helps to cover the cost of damage that may incur due to the occurrence of various adverse situations in the business. Such a situation may be like property damage and unforeseen claims and liabilities.
It is advised to purchase all needed insurance from a single company. It is also suggested that the business owner must carry out a risk management audit of his business which identifies the areas of potential liabilities and probable losses.
There exists a wide range of insurance types to protect a business against risks and unforeseen circumstances.
Some of these are summarized as under
- Property Insurance – It should be on top priority whether you own or rent the place of business. It covers the damage of inventory, furniture, equipment and signage from fire, theft or storm. However, it does not cover events like floods or earthquake. There are reprobate policies for those events. You can take these policies if you place of business is located in areas which are proved to such kind of occurrence.
- Workers Compensation Insurance – It covers the liabilities against claims of medical treatment and death benefit of employees of your business if they meet such events while on business duties.
- Home-based Business – If your business is home-based, the traditional property insurance does not cover it. You should have a separate policy which covers the home based business.
- Business Interruption Insurance – This policy covers the losses due to interruption of business which is caused due to any catastrophe or accident. This is suitable for businesses which are operated from a fixed physical location like a store. Lost income due to the interruption is compensated under this policy.
- Professional Liability Insurance – This type of insurance covers claims that can arise as a direct result of negligence failure to perform duties or making an irreversible mistake leading to tangible damage. This policy is also called “Error and Omission” (E&U) insurance. Such policies are customized, as each industry and business differs in terms of the nature of work involved.
- Product Liability Claims – This type of policy covers the losses due to lawsuits that can often be filed against the owner or company for damages caused by one of its products, ever while taking every measure are taken to ensure the safe use of the product.
- Commercial Vehicle Insurance – It covers the claims and liability in care of accident by the commercial vehicle of the company. The companies should include the third party injury also, as this policy mainly covers the damage to vehicle, drivers and delivery persons and the goods being carried.
- Business Owner Policy (BOP) – It is a comprehensive insurance policy that covers all types of business needs. Business interruption insurance, property insurance, vehicle insurance, liability insurance are all covered in this type of bundled policy as it is less costly as compared to individual coverage.
- Reuter’s Insurance – This insurance is for those who rent their property to commercial or private use. It covers damage to physical property, its possessions or personal industries caused within this property.
- Data Breach – Most of the companies keep record and non-public information or data of sensitive nature pertaining to the business and employees or their client within their computerized database. This policy protects them against damages or cost incurred due to a breach of the data.
- Directors and Officers Insurance – The directors and officers of a company can find themselves in a lawsuit if their action or decision have affected company profitability. This policy covers the probable losses caused due to this situation.
- Key man Insurance – This policy protects against the sudden death or illness/ disability of a key person in the business, or Golden Handcuff Gratuity which is a reward for employees for a long period of service or loyalty to the company. This policy may also include the clause that covers the medical and hospital charges in the event of their illness.
Some other types of corporate insurances which are user’s specific are –
a. Fidelity Insurance
b. Professional Industries
c. Consequential Loss
d. Trade Credit Loss
e. Marine Cargo Insurance
It is therefore suggested to all business persons and entities to identify the areas of the possible haggard in the normal course of their business operation by carrying out a risk and safety management audit and then consult a good insurance agent to buy appropriate policies to safeguard the economic and financial interest of the business.