Insuring Your Business: Small Business Owners' Guide to Insurance

Professional practices need the same types of insurance as any other business for property, workers compensation and vehicles. Many professionals view professional liability insurance as an even more critical coverage. Professionals are concerned that in today’s litigious society, every mistake, suspected mistake or incident of client or patient dissatisfaction can lead to a lawsuit. Professional Liability Insurance protects them from the potentially ruinous economic consequences of this risk.

For many specialties, the most cost effective and efficient way to obtain property and liability coverage is with a specialized Businessowners Policy (BOP). Insurers have put together combinations of coverage specifically tailored to the needs of physicians, architects, accountants, attorneys and many other practices. These policies typically have provisions similar to the property insurance and liability insurance sections of the BOP.

Property Insurance

A package policy covers real estate and other property your business owns. If your practice rents or leases its premises, the policy provides coverage for tenants' improvements and betterments. These are fixtures, alterations, installations or additions that you have put into the space that cannot legally be removed from the landlord’s premises.

The policy will probably include two coverages that are often critical for business recovery after a disaster: Business Income and Extra Expense Insurance (also known as Business Interruption Insurance). Business Interruption Insurance helps pay ongoing expenses while your business is unable to function after a loss and also helps make up for lost profits. Extra expense coverage helps you recover as quickly as possible by paying extra expenses caused by the loss—such as rent for temporary quarters.

With electronic data playing such an important role in business today, the policy will likely include such coverage as Computer Operations Interruption Coverage to pay for business income lost and extra expenses incurred as a result of computer problems. Electronic Data Loss Coverage pays the cost to replace or restore electronic data destroyed or damaged as the result of causes of loss named in the policy. These include a computer virus or harmful code. As needed, you can add even more coverage through endorsements. You should discuss your needs with your agent.

Coverage can easily be added to these policies for such items as special equipment, fine arts, valuable papers and records, and accounts receivable.

Professional practices should also consider adding Employee Dishonesty Insurance Coverage to protect against theft by their own employees.

Liability Insurance

When you provide any type of advice, expertise or professional service you risk being sued by a customer, client or other third party who claims he or she was injured due to your negligent act, error or omission. Professional Liability Insurance, also known as Malpractice Insurance, and Errors and Omissions Liability Insurance pays the cost of your defense and any damages awarded, up to policy limits. Insurance companies have developed many specialized policy forms that respond to the individual risks characteristic of particular professions.

A practice also needs coverage for other potential liability risks it has in common with many other types of enterprises, such as a slip and fall claim or a libel or slander claim. Click here for information about the protections typically provided by liability insurance and about optional coverages you may wish to add.

Business Vehicle Insurance

Your personal auto policy probably provides coverage for some business use of your vehicle. A personal auto policy is unlikely to provide coverage, however, if the vehicle in question is used primarily in business. It will not provide coverage for any vehicle owned by a business. For those vehicles you must have a business auto policy.

Should you be driving your personal auto for a business purpose and get into an accident for which you are liable, an injured person could sue you personally. Will your personal auto policy have enough coverage to pay all the damages? If not, a lawsuit may be filed against your business. If you use personal vehicles for business, you want to be sure you have high enough limits to protect your business. You should discuss this with your insurance agent.

Workers Compensation Insurance

States have varying rules about when an employer must provide workers compensation insurance. If you have three or more employees, you should check with your state department of workers compensation to see if you are required to provide workers comp insurance.

More Information On Coverage



Business Vehicles

Workers Compensation