Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com.

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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small business insurance requirements

The inordinate number of small business insurance requirements is one of the shocking surprises encountered by people who set out to establish a business. Some business owners will attempt to cash in on their luck instead of taking the prudent action and insuring against loss.

Take a few moments to compare business rates and insure your business against any loss. Enter your ZIP code above to begin!

Only one in five businesses recovers from a catastrophic event, such as flood, fire, tornado, or death of a business principle. These statistics alone should encourage all business owners to maintain sufficient insurance coverage in each of the following major categories.

Business Property Insurance

Every aspect of the business location should be covered by replacement value insurance. Various types of loss can occur because of the actions of employees, customers or business partners. When loss occurs, a reputable insurance provider will send an adjuster in a timely manner and cover the loss according to the policy.

Comparison shopping is the best way to find the appropriate coverage levels at the lowest possible annual premium. Major categories of business property insurance include:

business property insurance

Buildings – Location is the number one factor considered when setting the annual insurance premium. Some businesses choose to relocate to make insurance more affordable. Every interior and exterior feature on the property must be covered in the policy, and the land should be excluded.

Contents – Special consideration must be given to expensive equipment that would have to be replaced. One way to lower the cost of contents insurance is to place riders on the policy for specialized equipment.

Flood – Some locations are in flood plains and must be covered through the federal government flood insurance plan. Significant damage to property from a flood can end the life of a business and put a lot of people out of work.

Loss of income – Replacing the company’s income through this type of insurance is important if a significant event occurs. Throughout the rebuilding process, this type of insurance would provide income, based on the previous earning record from previous months, and employees could still receive their paychecks.

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Liability Insurance

Covering the loss of property for other people is one of the most important dimensions of business insurance. More liability claims are made each year than property-related claims because of the many ways loss can occur. Several categories of liability coverage exist, including:

Personal injury – If anyone is injured while on the property, this type of coverage will pay for litigation awards. Some policies will pay for the legal counsel associated with litigation cases.

Fire liability – A business that leases property would be wise to carry this special type of coverage for the owner’s property. If a fire were to start inside the building, the cost of replacing the building falls on the business owner and not the property owner.

professional liability

• Professional liability – Advice provided by accountants, attorneys and consultants can results in litigation if the advice is inaccurate or incomplete. This coverage is called errors and omissions. For physicians, malpractice insurance is required in every state.

Medical payments – If anyone except an employee sustains an injury while present on the property, this coverage will pay the medical bills up to the limit on the policy. Employee injuries are covered under the worker’s compensation coverage.

General liability – Certain types of businesses are sufficiently covered with a general liability policy, but care must be exercised to make certain that this type of coverage is appropriate.

Employee Practices Liability – When mistakes are made in the process of conducting work for customers, this narrow category of coverage would cover the expenses incurred to repair or replace property belonging to a third party.

Excess Liability – Umbrella liability policies are recommended by many insurers because of the prevalence of litigation. Very large amounts of coverage can be purchased at lower annual premiums that raising the liability coverage on each individual insurance policy.

Worker’s Compensation Insurance

Every state requires companies with employees to carry worker’s compensation insurance. This coverage will pay for the lost income, medical expenses and damages incurred while on the job regardless of their work location. This coverage is provided through the state and must be sustained as long as the employees work for the company. Job descriptions play an integral role in the cost of this insurance because each job carries a certain element of risk of injury. Safety training for employees will reduce the cost of annual premiums.

Automobile Insurance

Some business owners make the mistake of assuming their personal automobile policy will cover business vehicles. Insurance companies will deny claims when loss occurs because the car or truck was used for business. All vehicles that belong to the business must carry appropriate amounts of comprehensive, collision and liability insurance. If tools and special equipment are kept inside the vehicles, additional coverage would be prudent because those are business tools that are essential for productive work.

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Life Insurance

Most people do not enjoy considering their personal mortality, but very few businesses survive the loss of an owner or partner. The amount of life insurance to carry on the life of each owner will depend on the size of the business and a number of other factors. Insurance on the life of an owner would be separate from the personal life insurance coverage that would have the family as the stated beneficiary. On a business life insurance policy, the business itself is named as the beneficiary, and the written succession plan would state how the funds paid by the insurance company are to be used.

An Easier Approach

Some of the most reputable insurance companies offer a business owner’s policy, or BOP, that combines all of the most popular components into one policy. Riders can be added to the BOP to cover special aspects of virtually any business. Ease of maintenance is the strongest selling point for a BOP. Adjustments can be made throughout the year when equipment and vehicles are purchased and sold. Care must be exercised to make certain that every type of necessary coverage is included. All of the risk factors facing the business must be revealed as the policies are written.

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