3 common small business insurance policies, made simple

Editorial Team

6 min read
Woman holding paper looking at tablet

Business insurance is not usually top of mind for most business owners — until they need it. But when it comes time to buy insurance or file a claim, the whole process seems complicated with jargon. This is because insurance can be nuanced, with different insurance protecting different things.

Luckily, there’s no need for you to become a business insurance expert. Familiarizing yourself with common kinds of small business insurance and how they differ does help you do two things:

  1. Make informed decisions about what coverage is right for your business.
  2. Understand how your insurance protects you so you can serve your customers confidently and not sweat the unexpected.

3 common small business coverages

The kind of coverage you’ll need varies by multiple factors, such as your industry, the work you do, and your equipment, employees and customers. Here are three of the most common kinds of business insurance.

1.   General liability insurance

General liability insurance is usually the first policy new businesses purchase, making it the most common insurance for small businesses and self-employed professionals. Sometimes called “slip and fall” insurance, it covers risks that affect almost every business.

General liability coverage provides financial protection if you are held responsible for common accidents or unexpected events that can happen at any business. Specifically it covers the following:

●  Injuries to people who are not your employees

●  Damage to property you don’t own

●  Accusations of libel or slander

For example: say it’s raining, and a customer sprains her wrist slipping and falling on the wet floor at your store. General liability insurance can help pay for the injured person’s medical expenses up to your policy limit. The amount and extent of coverage depend on the policy you purchase.

2.   Workers’ compensation insurance

If you have employees, you may already be familiar with workers’ comp. Aside from business owners wanting to do right by their employees, having workers’ compensation insurance is a legal requirement in most states.

A workers’ comp policy protects both employees and business owners, usually covering the following:

●  Medical expenses

●  Lost wages

●  Survivor benefits in the event of an employee death

●  Employer liability

For instance, suppose one of your associates wrenches his back while reorganizing your store’s stockroom, and the pain doesn’t go away. Workers’ comp could pay for the employee’s initial diagnosis, ongoing treatment and physical therapy. It prevents business owners from having to shoulder the entire out-of-pocket costs themselves.

Also, did you know that you can purchase workers’ compensation for yourself, even if you don’t have employees? Many self-employed workers, sole proprietors and independent contractors purchase a policy for financial protection or to meet a client’s contract requirements.

3.   Commercial property insurance

Commercial property coverage helps protect the things you need for running your business like your building, equipment, inventory and more.

Commercial property insurance typically covers:

●  Goods, gear and inventory — things that you own, use or rent inside your workspace

●  The building structure itself, independent of its contents

●  Business income interruptions if you temporarily have to close due to a covered event

●  Equipment breakdown and malfunctions

Say a big storm knocks out power to your restaurant’s freezer and refrigeration systems, ruining your food inventory. Having commercial property insurance that includes spoilage coverage can help cover the loss and pay for replacement inventory.

Now that you’re familiar with some of the most common kinds of small business coverages, let’s look at how they differ from each other.

What are the differences between General Liability and Workers’ Compensation?

General liability and workers’ comp are pretty straightforward to understand. Workers’ compensation covers your employees’ injuries and medical expenses, while general liability covers third-party or non-employee injuries.

Workers’ comp helps you with employees’ or your own work-related injuries and related medical treatment. It cannot help you with claims associated with customers or vendors who walk through your doors.

On the other hand, general liability insurance can help pay for expenses if your business is accused of causing an injury to a non-employee. They could be customers, vendors, investors or others, but injuries to you or your employee are not included.

How is General Liability different from Commercial Property?

On the surface, general liability and commercial property may sound similar: they both cover damage to property. However, the big difference is that commercial property insurance covers your property and general liability covers other people’s property.

Commercial property policies protect your gear, goods and buildings — things that belong to you. So if a fire from a restaurant next door damages the side of your property, you would have help paying for repairs.

Unlike commercial property coverage, general liability only covers damage and injuries your business may cause to other people’s things. It doesn’t cover damage to your business’ property. For example, suppose one of your servers accidentally spills soup on a customer’s designer handbag. Your general liability insurance would help cover the cost of cleaning or replacing the bag.

You might have already guessed that these two kinds of insurance work in tandem. They’re often bundled together in a package called a BOP or Business Owner’s Policy. A BOP is a convenient and cost-effective way to get both coverages.

Insurance doesn’t have to be complicated for business owners

Business insurance need not be complex or intimidating. When you search for the right insurance provider, keep your business needs at the forefront.

●  Ask questions until you understand what coverages you’re getting.

●  Look for insurance you can tailor to your business’ needs, not the other way around.

●  Evaluate how the provider handles basic insurance processes (getting insurance quotes, accessing certificates of insurance).

●  Assess whether the provider’s tools and processes work for you. Do you prefer to handle tasks online yourself, or do you prefer talking to agents? Or both depending on the situation?

Once you’ve considered what works for you, you can put together the protection you need to help your business flourish.

Interested to learn more? Then check out NEXT Insurance in the Clover App Market.

Important Disclaimer: NEXT Insurance is the sole and exclusive provider of services described in this article. Clover does not make any representations or guarantees as to these products / services.  Please see NEXT Insurance Terms & Conditions for more information. 

This information is provided for informational purposes only and should not be construed as legal, financial, or tax advice. Readers should contact their attorneys, financial advisors, or tax professionals to obtain advice with respect to any particular matter.

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