Business Insurance

As you decide on your business’s insurance needs, think about two broad categories—property and liability. While these two types of insurance are not required in a legal sense, you will have many good reasons to make sure that you have adequate coverage. Besides protecting your personal and financial investment, insurance may be required as part of a lease or loan agreement.

What is liability insurance?

Liability coverage protects against situations like accidents that cause an injury to someone who is on your property. Another type of liability insurance protects against lawsuits from people who have used products that you produced and claim to be injured by them.

You can also obtain auto liability insurance, which covers damage in a business-related accident. It is legally required in almost all states and is not included in general liability policies. Even personal cars that are used for business purposes should be covered by auto liability insurance.

Comprehensive general liability insurance covers any liability for property damage or personal injuries, unless they are designated as excluded. The general liability policy covers an “occurrence”—meaning personal injuries or property damage to another party. It is important to keep the policy in force. Once it has lapsed, the insured is no longer covered.

Can the insurer make exclusions from its general liability coverage?

Yes. If an insurance company can prove that the insured “expected or intended” certain damage, it can be excluded from coverage. This is difficult to prove since the insurance company has to show what the company was actually thinking at the time.

Will my liability insurance cover my intellectual property?

Insurance companies are beginning to exclude coverage for personal injury to others that result from events such as slander, copyright infringement, trademark infringement or invasion of privacy. As a small-business owner, you can request an endorsement to include this coverage. Cyberspace insurance policies are now available for companies that do a lot of business on the Internet.

Beyond intellectual property, an insurance policy may specify that coverage for damages is limited to “tangible” property or physical damage that has occurred. This creates an opening for computerized data to be questioned on a claim.

If your company provides computer hardware, software or programming services, find out whether the standard policy includes this coverage. If not, seek an endorsement from your insurer.

Can I get specialized forms of liability insurance?

Specialized liability insurance is focused on covering endorsements that might be excluded in the general liability policy. This might be in the form of an endorsement to the general liability that covers an item that would otherwise be excluded.

Or, if a liability is related to a risk unique to a profession, it will call for a specialized policy such as errors and omissions (E & O).

Can I get insurance against liability for cleanup to a polluted site?

Yes, you can ask for an endorsement that covers liability for environmental hazards. It is possible that cleanup costs will be charged to a new owner or party that did not actually cause the damage.

It is likely that the insurer will require an environmental inspection to be conducted. One difference between an environmental inspection and a standard inspection is that the environmental inspection is concerned with pollution that could harm property or people outside the boundaries of the insured property.

Do I also need property insurance for my business?

Property insurance is exactly what it sounds like. It covers physical property against loss or damage. Typically, you can expect property insurance to cover furniture and fixtures, machinery, office equipment, computers and inventory.

You can choose between several types of property insurance—basic, broad or special coverage. A basic policy covers damage from fire, storms, smoke, riots and vandalism. The broad form might add broken window damage and water damage to coverage.

Is theft covered in my business property insurance policy?

Many business owners are surprised to find that theft is not covered under their basic or broad property insurance policies. To get theft coverage, a special form policy is needed, or an endorsement to a general policy.

What does “special form” property insurance cover?

This is the strongest form of property insurance protection. It normally covers all risks unless they are specifically excluded.

What else should I look for in property insurance?

Check the limits on the coverage you have. Be sure you know what your deductibles are. Guaranteed replacement cost can be an important component of your insurance plan. With replacement cost, you will be reimbursed at the current price of items that have been damaged or totally destroyed.

How do I find and buy business insurance?

If possible, try to find an insurance broker who is knowledgeable about your particular business. He or she might show you policies that are specifically designed for your type of business. The most important point is to understand exactly what your policies do and do not cover.