Setting up your own business exposes you to potential risks. Aside from the fact that no one can really predict what will happen in the future, a business can face countless detrimental events, natural disasters, or lawsuits that can ruin your company. For this very reason, it is essential to safeguard your personal and business assets.
You can thoroughly do that by protecting your company with Business Insurance. This is the rationality behind home businesses bearing the statement “licensed, bonded, and insured” on their signs. More than fostering trust, having insurance builds your business credibility.
With that said, let’s look at the six fundamental insurance recommended for small businesses in Texas:
1. General Liability Insurance
Liability Insurance is practically necessary for every type of business. With this coverage, it secures you and your business from “general” claims concerning bodily injuries and property damage. Moreover, in availing this policy, it allows you to cover medical and attorney expenses following property damages and bodily injuries which your company may be lawfully liable.
In addition to that, it shields you from liability for damages on rented properties. Keep in mind though, what this insurance doesn’t cover are employee injuries, car injuries, punitive damages, workmanship, and intentional acts or professional mistakes. Insurance costs may vary, but normally general liability insurance, as suggested by cost figures, costs around $400 to $1,500 a year.
2. Professional Liability Insurance
Alternately called Errors and Omissions (E&O) Insurance, this policy protects practitioners such as accountants, lawyers, and physicians from claims against negligence, malpractice, misrepresentation, violation of good faith, and fair dealing.
With this insurance in effect, it can defray the fees of litigating your company in a civil lawsuit and particular damages accorded, whether the charges turn out to be groundless.
In some areas, this coverage is required for a few specific professional practices like medical and legal, where it is ordinarily called malpractice insurance. At any rate, this specialty coverage insurance is not offered in your general liability or homeowners insurance.
Incidentally, the professional liability insurance does not protect you from criminal prosecution, including legal liabilities under civil law, unless categorically expressed in the policy. Others such as cyber liability, which involves data breach and various digital issues are likewise not covered by this insurance.
3. Commercial Property Insurance
This policy allows owner or renter of a property to file claims for financial reimbursement in case of damage or theft. Commercial Property Insurance Commercial Property Insurance may include the following: homeowners, renters, flood, and earthquake insurance.
Damages inflicted by fire, smoke, wind, hail, the weight of ice and snow, lightning, and theft are usually covered by it. Additionally, it can also provide protection to an individual injured in the property other than the owner or renter who eventually opts to file a lawsuit.
The policy has three types: replacement costs, actual cash value, and extended replacement costs. Replacement costs cover expenses incurred in repairing or replacing your property with the same kind and quality. Insurance is oriented on the replacement cost values and not on the actual cash value of items.
Meanwhile, actual cash value covers replacement expenses sans depreciation. Lastly, extended replacement costs shoulder over the coverage limit in situations wherein construction expenses increase. Take note though, the maximum amount is within 25% of the limit.
Nevertheless, what this insurance does not cover are water damage as a result of floods, tsunamis, drain and sewer backups, groundwater seepage, standing water, etc. Similarly, it does not cover mold, earthquakes, nuclear events or acts of war same as terrorism, and insurrections.
4. Worker’s Compensation
Worker’s Compensation is a policy that provides employees compensation for any injuries or disabilities inflicted while on the job. In consenting to this policy, the said worker relinquishes their right to file a negligence lawsuit against his/her employer.
Besides that, the coverage or bargain is meant to protect both workers and employers. Looking at it, workers relinquish their right to a lawsuit for a guaranteed salary while companies agree to a particular cost of liability versus going thru a possibly colossal negligence charge. It’s beneficial to everyone including taxpayers involved because it avoids spending on legal fees that come with processing a trial.
With this type of policy, it covers medical fees resulting in ailments acquired while on the job. It can also be in the form of sick pay while on medical leave or in a type of payment to family or dependents if a worker passed away while employed. The policy does not cover tort of negligence. It shouldn’t also be mistaken with disability insurance or unemployment income. Remember that worker’s compensation only pays employees who are injured on the job.
On one hand, disability insurance covers the insured regardless when or where it happened. Likewise, the policy does not include unemployment. Fortunately, this policy is tax-free compared to unemployment income and disability benefits.
5. Data Breach
Data Breach Insurance is a policy aimed to protect and support a company once it experiences cyber-attack. Often, comprehensive data breach insurance covers legal advice, forensic investigations, notifications to clients, customers and regulators, credit card monitoring to affected customers, and cover the ransom your business is forced to pay the hacker.
Furthermore, a cyber-attack may cause substantial loss of income. When you have this type of insurance, it can furnish compensation for the loss of income. If your business creates and keeps delicate files such as bank account details, customer records, social security numbers, and credit card information, then you are at risk of a data breach.
The size of the operation does not matter. Even if you are an advertising professional working from home or a salon business which stores sensitive information, it is best to safeguard your asset.
6. Business Owner’s Policy (BOP)
The BOP is a policy which bundles the basic insurances needed by a business owner. It is typically offered at a lower total cost than those of the individual policies.
A standard BOP covers property, business interruption, and liability protection insurance. Optionally, a business owner may decide to add vehicle coverage, crime, and flood insurance. You can also arrange to include spoilage of merchandise, crimes, computer equipment, mechanical breakdown, forgery, and fidelity bond.
BOP generally does not cover professional liability, worker’s compensation, and health or disability insurance.
When shopping for Commercial Insurance in Texas, the Thumann Agency in Dallas is here to help evaluate your individual needs and put together an insurance package that is right for your business and budget.
Credit: This article was written for the Thumann Agency by Alicia Jeandie Henry.