What are the Different Types of Small Business Insurance?

Small business insurance may protect a company against claims concerning workplace injuries, property and building damage, product malfunctions, professional mistakes and workplace conflicts. Each policy often provides individual protection against a specific event. Some policies such as workers compensation and property insurance may be mandatory based on local or national laws. Elective small business insurance policies, such as website insurance and employment practices liability, may pertain only to specific companies. Comprehensive general liability is a broad policy often intended to protect third-parties, although product liability and errors and omissions coverage may be included in some instances.

Business insurance is often intended to protect against costly risks. Fire damage or theft, for example, may bankrupt a small business without insurance to recover lost or stolen goods. Insurance is thus often part of a company's total management practices. In many cases, insurance protection can improve business relationships by conveying to customers and investors that their interests are safeguarded.

Small business owners are often in the unique position of selecting insurance coverage based upon needs. Policies may thus be individually tailored. Some owners, however, need insurance policies as mandated by law. In the United States, for example, businesses must often pay unemployment and disability insurance premiums in accordance with state regulations.

Small businesses may also be mandated by local or national laws to carry workers’ compensation insurance. This often pays benefits to employees who are injured on the job while also safeguarding employers from related litigation. Laws concerning this type of small business insurance may differ across regions.

Business property insurance may be another mandatory policy, depending upon community mandates. In addition to protecting against events that may cause property loss or damage, some policies also protect against loss of income and such natural disasters as earthquakes and floods. People who rent business spaces may want to discuss this coverage with the property owner, who in many cases is the building policy holder. Tenants may still need a policy to protect such internal items as desks, chairs and office equipment. An all-risk policy may also be available that is designed to cover all equipment, including computer software and valuable printed records.

Some small business insurance coverage may be purchased for select purposes. To illustrate, website insurance often covers consumer claims that arise from shared private information, advertising assertions or faulty items sold online. This is likely to be an elective policy, although some businesses may find it compulsory because of a strong Internet presence.

Another elective policy may be that of product liability. Small businesses involved with manufacturing, selling or distributing any component or end-product may be held accountable during a consumer lawsuit. Product liability insurance may protect owners in such events, although premiums may vary considerably with regard to location and the product itself. High sales revenue may also drive the cost of this insurance.

In some cases, comprehensive general liability insurance may include product coverage. General liability is often an important policy intended to cover third parties in the event of personal or advertising injury, negligent fires and completed operation errors. An example of these claims may be a customer who slips on an icy sidewalk while patronizing a business. In such an instance, the company’s general liability coverage would likely protect the owner from civil law proceedings.

Errors and omissions insurance coverage may also fall under general liability policies, although it may need to be written separately in some cases. The scope of this small business insurance is to protect the company from any number of professional errors that may arise. In clinical environments, this is often referred to as malpractice insurance. Additional examples may include shipping a customer order to the wrong location or damaging a customer’s residential water main while building a neighboring home.

Employment practices liability insurance likely provides protection against claims made by employees concerning discrimination and sexual harassment. Additional instances may occur in which practices are not in place to discipline or terminate employees. Many corporate investors ask business owners to carry this insurance even when few employees compose an entire group.