Insuring your small business

Insurance protects your business from the unexpected - theft, fire, lawsuits and more - and is available for almost every kind of business risk. The types of insurance you need depend on the specific situation of your business. To decide which insurance options are right for you, you must weigh the risk of the event happening with the cost of the insurance premiums.

On a broad scope, business insurance can cover property, liability, people or income. Insurance policies can get very granular and targeted to very specific needs. Read your policy carefully to understand what exactly is covered and what is not, as these terms vary from policy to policy. Common types of business insurance:

Property insurance
This insurance protects against loss or damage to the company's location and contents. It can protect against damage from fires, electrical surges and sometimes embezzlement. Experts recommend that most businesses have property insurance.

Workers' compensation
This insurance pays employees' medical expenses and lost wages if they get injured on the job. The amount of workers' compensation insurance varies by state. Most states require businesses to carry this type of insurance.

General liability insurance
General liability insurance protects against the cost of legal fees related to bodily injury, property damage and more. Experts recommend that almost every business have general liability insurance.

Umbrella liability insurance
This policy covers your business over and beyond the scope of the general liability insurance protection.

Errors and omissions insurance
Errors and omissions insurance, called malpractice insurance in the medical field, protects you against professional error. For example, if you inadvertently destroy a customer's property in the course of doing business, this insurance would protect you against the lawsuit that might result.

Commercial auto insurance
This policy covers automobiles used by your business and insures against property damage to vehicles and damage and injuries those vehicles cause. If your business has autos, you most likely will need this insurance.

Product liability
Because almost every product and service can harm users or property, product liability insurance is often crucial for a business. Businesses are liable for negligence, breach of warranty, defective products and product warnings or instructions. Product liability protects a business against claims related to these issues.

Criminal insurance
Theft, vandalism, hacking, embezzlement and other malicious damage can happen to any workplace. Criminal insurance can protect against these happenings.

Home-based business insurance
Your homeowners insurance policy will usually not cover your business, even if you operate the business out of your home. You likely need a home-based business insurance policy, which may cover business issues including: property, liability, personal and advertising injury, crime and theft, and disability.

Internet business insurance
If you have a Web-based businesses, you might want to consider this insurance, which covers liability issues related to damage done by hackers and viruses. It might also cover online activities, including lawsuits related to meta-tag abuse, banner advertising or copyright infringement.

Business interruption insurance
This insurance covers the losses associated with a business being forced to close as a result of natural disasters, fires and other catastrophes.
Key person insurance (also called life and disability insurance)
This is basically a life insurance policy for a key person in the company that names the business as a beneficiary when that person dies or is disabled.

Health insurance
Many businesses now offer their employees health insurance, which covers health-care costs for the employee.

Other insurance questions:

Should you buy a package policy?
Many insurers will bundle a variety of types of insurance into one package, often called the Business Owners Policy (BOP). Often these policies offer broader coverage at a less expensive cost than if the business owner had purchased each policy individually. But because these package deals differ widely from insurance company to insurance company, you will need to do some comparison shopping to determine if one is right for you.

Where to find more information
Visit the Insurance Information Institute at iii.org for more information. The institute has a small business insurance section that can answer your questions.

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