Every business faces risk as it grows. A slip-and-fall, fire, hack, or employee lawsuit can upend your operations overnight. The right business insurance protects your cash flow, contracts, and long-term financial stability.
At Bowthorpe & Associates Insurance Producers, we partner with business owners who only want coverage that matches their actual exposure, not canned products sold under confusing policy names. Here are the underlying policies every commercial program should include.
Standard Commercial Policies
General Liability Insurance
General liability insurance shields your business from third-party claims of bodily injury, property damage, and advertising injury.
If a customer trips in your store or your installer breaks a client’s window, general liability coverage will typically pay for defense and settlement. Most small and medium-sized businesses purchase one million dollars per occurrence limits and two million dollars in total (aggregate) limits. Higher-risk businesses may require more.
It doesn’t cover professional services errors, employee injuries, or automobile accidents. These perils require separate coverage. However, for most businesses, general liability is insurance’s primary layer of protection.
Commercial Property Insurance
Property insurance covers damage to your physical assets. This can include the building, improvements you make to a leased space, inventory, equipment, furniture, and computers.
If your building suffers fire damage or a hailstorm ruins your inventory, property insurance pays to put things right. Depending on your policy, you can be reimbursed without depreciation (replacement cost) or pay-outs can be adjusted for age and wear and tear (actual cash value).
Don’t cut corners on your building or contents values. Most policies enforce a coinsurance penalty if you fail to insure at least eighty percent of the total value.
Business Interruption Insurance
Business interruption insurance kicks in when you must temporarily close-up shop due to a covered loss to property. Not only will it replace lost income, but it will also pay for expenses your business would have incurred if the damage had not happened.
Rent, payroll, and other fixed costs do not stop because your restaurant burned down. For many businesses, business interruption coverage is just as important – if not more important than the policy covering the actual property.
When determining your limit, be realistic about how long it could take to get back to normal. Many businesses think a few days when it could easily be weeks.
Workers Compensation Insurance
Once you have employees, you are required to carry workers compensation in most states. Workers comp covers medical costs and wage-replacement for employees who are injured on the job.
Workers comp also provides valuable protection against most lawsuits related to employee injuries. Premium is based on payroll and your business classification. Safety programs and return-to-work initiatives can greatly influence your premium.
Accurate payroll reporting and proper class are very important. These are two items that auditors look for when reviewing your policy.
Professional Liability (Errors and Omissions)
Also known as errors and omissions, professional liability insurance protects your business when you provide professional advice or services to others.
Professional liability doesn’t cover property damage or bodily injury like general liability. Instead, it covers financial losses your clients may suffer due to errors in your work or failure to deliver a promised result. Claims can arise years after the work is completed, so most policies are written on a claims made basis.
Consulting firms, technology companies, engineers, marketing agencies, and many healthcare providers need this coverage. Professional liability claims often involve defense costs in the six figures.
Cyber Liability Insurance
Today cyber exposures are a leading business risk. Whether you’re a Fortune 500 or a neighborhood bakery, your business can be crippled by ransomware demands, data breaches, or computer shutdowns.
Cyber liability can cover forensic investigations, data recovery, legal fees, notification expenses, and lost income caused by a network disruption. Some policies even cover ransomware payments and regulatory penalties where applicable.
Small businesses that collect customer data or rely on technology should not overlook cyber insurance.
Commercial Auto Insurance
If your business owns vehicles or employees use their personal cars for work purposes, you need commercial auto coverage.
Commercial auto covers both liability and physical damage caused by automotive accidents. Many business owners overlook hired and non-owned auto liability, which protects the company when employees use their personal vehicles for work tasks.
Failure to add these endorsements can leave your company personally liable for a bad accident.
Directors and Officers Insurance
Directors and Officers insurance, also called D&O insurance, protects corporate directors, officers, and board members from claims alleging mismanagement or errors in their governance of the organization.
These claims can come from investors, regulators, and more. Legal defense costs for D&O claims can spiral even if the allegations are untrue.
Public companies are required to have D&O insurance. Private companies without any outside investors may choose not to. But if your business has outside investors, a board of advisors, or other complex ownership structures, D&O is worth considering.
Your Policy Should Evolve with Your Business
Not every business needs every type of coverage. Service businesses likely don’t need property insurance. Sole proprietors can often get coverage through their personal auto insurance policy.
But most businesses need at least some combination of commercial liability, property, worker coverage, and some form of business income insurance.
Start with these basics:
General liability insurance
Property / Business Interruption Insurance
Workers compensation
Commercial Auto Insurance (if needed)
Then consider adding professional liability, cyber liability, EPLI, and D&O coverage as your business enters new contracts or plans to grow.
Make sure to review your insurance limits annually. As your revenue grows, your contracts expand, and your services change – your insurance program should too.
FAQ
Q1: What insurance does every business need?
A: There’s no one-size fits all commercial insurance program. Most businesses however, require some combination of liability, property, employee coverage, and business income insurance.
Q2: What business insurance is required by law?
A: Workers compensation insurance is required in most states once you have employees. Commercial auto coverage is required if your business owns vehicles. Your city or county may have other requirements.
Q3: How much general liability insurance should a business owner carry?
A: Most small businesses carry $1,000,000 per occurrence limits and $2,000,000 in total. Contractors, real estate professionals, and businesses with high public exposure may need higher limits.
Q4: Is business interruption insurance part of property insurance?
A: Business interruption insurance is typically added to a property policy or BOP, but it doesn’t automatically include income coverage. Make sure business interruption is added to your property insurance.
Q5: Does cyber insurance cover ransomware?
A: Cyber policies typically cover ransomware remediation, including forensic experts, extortion demands (where allowed), and data restoration.