Is business insurance required by law?

The simple answer is Yes. Federal law requires every business with employees to have three basic types of business insurance: Workers' Compensation, Unemployment Insurance, and Disability Insurance. Having this insurance enables employers to provide their workers with income if they are injured on the job or become permanently disabled, and for their workers to receive unemployment benefits temporarily if they are laid off.

Since state laws on the matter vary, with some states requiring additional kinds of insurance, it is essential to check your own state’s website to determine whether any other type of business insurance is mandatory in your location.

Consulting with an experienced insurance advisor may be helpful in this regard. Because insurance advisors have comprehensive knowledge of business insurance and do not serve the interests of any one insurance company, they will offer objective advice about which policies are best suited to your needs.

Why It Is Critical to Have Business Insurance

No matter how well-established or thriving your business is, without proper insurance you may be one accident or incident away from losing it. While you are no doubt aware of the

costs that affect your bottom line on a regular basis, you may not have considered the enormous potential expense of one major mistake, one lawsuit, or one natural disaster.

Like all insurance, Business Insurance provides funds to cover property damage and personal liability claims in case of unexpected calamities, funds that you would otherwise have to pay out-of-pocket. More than cost-effective, Business Insurance is crucial if you want your business to survive. While you may feel that having chosen to structure your business as a corporation of an LLC you already have protection, but such structures typically protect only your personal property from lawsuits, and even that protection may be limited.

Factors that Affect the Type of Business Insurance You Need

A well-informed insurance advisor can be invaluable when you are deciding which types of Business Insurance your company needs. Much will depend on the nature of your business, as well as its size, number of employees, and location.

Some types of business, such as construction, are known to be at high risk of liability claims, while others, such as financial services, may be at higher risk of claims of misconduct. This is why it is important to work with an insurance advisor who understands precisely how the Business Insurance needs of a small retail shop will differ from those of a moving company, manufacturer, service provider or professional practice.

Types of Business Insurance to Consider, Whether or Not Your State Requires Them

There are a great many kinds of Business Insurance available and new policies are created as social views and technological advances alter the business landscape. Below are some of the policies you may be interested in for your company:

• Business Automobile Insurance provides coverage for all vehicles used in the course of operating your business, and may include vehicles owned, leased or hired by the company as well as employee-owned vehicles used for business purposes.
• Business Liability Insurance protects the financial interests of your company and its owners if confronted by formal lawsuits or third-party claims,providing coverage for legal expenses as well as settlements.
• Commercial Property Insurance is appropriate for businesses with substantial property and physical assets which may incur damage from fire, smoke, wind, hail storms, rioting, theft or vandalism. Note: Flood and/or Earthquake Insurance may require added riders.
• General Liability Insurance provides coverage for bodily injury, property damage, medical expenses, libel or slander claims.
• Business Income Insurance (Business Interruption Insurance) covers your business for a period during which it must suspend normal operations, typically while property damage is repaired or replaced.
• Cyber Security Insurance provides coverage for data breaches, business interruption, and network damage.
• Employment Practices Liability Insurance (EPL or EPLI) covers employers from claims of discrimination, sexual harassment, wrongful termination and other employment law issues.
• Equipment Breakdown Insurance may be vital for any company that depends on mechanical or electrical machinery, such as computers, copiers, printers, in the workplace. This insurance provides coverage for repair or replacement costs.
• Professional Liability Insurance protects businesses that provide professional (e.g. legal, medical, accounting) services against liability that results from errors and omissions.

You may be surprised to learn how very specialized insurance policies can be. Your insurance advisor may be able to find you a policy that seems to have been customized to meet the special needs of your particular business.

Steps to Take When Purchasing Business Insurance

Buying Business Insurance need not be a complicated process, but it does require alert inquiry and careful consideration if you intend to make certain your business has maximum protection at a reasonable price. Working with a skilled insurance advisor is strongly recommended.

1. Risk Assessment

A professional who has experience in risk management and understands the possible dangers to your type of business due to accidents, natural disasters or lawsuits will help you figure out which kinds of Business Insurance are absolutely essential for you and which may be good add-ons if you can afford them. Your advisor will also have access to relevant statistics.

2. Shop for the Best Deal

As with most products and services, Business Insurance prices and benefits can vary widely, so it is important to carefully compare rates, terms, and benefits from various companies. Here again, an insurance advisor can be of great help since he or she has intricate knowledge of policies available from multiple insurance companies and no ax to grind in terms of which you choose. Working with an insurance advisor saves you the time it would take you to consult with agents of many different companies.

3. Reassess as Your Business Grows and Changes

Be aware of the changes your business undergoes and how those changes impact your insurance needs. One thing you have certainly learned as a business owner is that a stagnant business cannot survive. Whether you are making incremental improvements or monumental changes to your company, make certain that your insurance policies keep pace. Regular re-evaluation of your Business Insurance needs will help keep your business protected and thriving.

While it is important to know which types of Business Insurance are legally required, it is equally important to know which types are vital to the health of your individual company. Don’t be caught short -- consult with a skilled insurance advisor today.