3 Types Of Business Insurance You Must Have
Is your business insured? Are you prepared for when the unexpected, the impossible or even the most absurd disasters hit your business? While most see business insurance as an unnecessary expense in these tough time, the price you will pay for not having it can be severe and one that can ruin your business for good.
Every business and every type of business will have different business insurance needs. Identifying your business risks is a very important first step. then plan to protect your business from the largest risks that could but you out of business.
Apart from some basic business insurance policies on your building and your company assets, there are three very important types of business insurance that is well worth looking into.
1.Professional indemnity Insurance
Professional indemnity insurance only applied to certain types of work but it basically safeguards your business against professional “mistakes” that are liable to lawsuits. Suppose you are an engineer and one of the structures you designed collapsed, then it can cost you more than just your license. With professional business insurance indemnity you are safeguarded and even if you are the best engineer in town, anyone can make a mistake which is why this is so important.
2 Business Interruption Coverage
(also known as business income insurance) is a type of business insurance that covers the loss of income that a business suffers after a disaster. The income loss covered may be due to disaster-related closing of the business facility or due to the rebuilding process after a disaster.
It differs from property business insurance in that a property insurance policy only covers the physical damage to the business, while the additional coverage allotted by the business interruption policy covers the profits that would have been earned. This extra policy provision is applicable to all types of businesses, as it is designed to put a business in the same financial position it would have been in if no loss had occurred.
This type of coverage is not sold as a stand-alone policy, but can be added onto the business insurance property insurance policy or comprehensive package policy such as a business owner’s policy (BOP). Since business interruption is included as part of the business’ primary policy, it only pays out if the cause of the loss is covered by the overarching policy.
The following are typically covered under a business interruption insurance policy:
- Profits. Profits that would have been earned (based on prior months’ financial statements).
- Fixed Costs. Operating expensesand other costs still being incurred by the property (based on historical costs).
- Temporary Location. Some policies cover the extra expenses for moving to, and operating from, a temporary location.
- Extra Expenses. Reimbursement for reasonable expenses (beyond the fixed costs) that allow the business to continue operation while the property is being repaired.
- Civil AuthorityIngress / Egress. Government-mandated closure of business premises that directly causes loss of revenue.[3] Examples include forced business closures because of government-issued curfews or street closures related to a covered event.[4]
This coverage extends until the end of the business interruption period determined by the insurance policy. Most insurance policies define this period as starting on the date of the covered peril and the damaged property is physically repaired and returned to operations under the same condition that existed prior to the disaster.
In addition, businesses can purchase contingent business interruption coverage, which pays out when a business is unable to operate because of an event (such as a natural disaster) that damages the business premises of one of its suppliers, thus preventing it from engaging in normal trade.[6]
3.Trade Credit or account receivable insurance .
Protects your business biggest asset against both commercial and political risks that are beyond your control. It improves the quality of your bottom line and helps you to grow profitably, minimizing the risk of sudden or unexpected customer insolvency. It protects your business usual largest asset and improves its quality – the accounts receivable. Trade Credit insurance –business insurance gives you the confidence to extend credit to new customers and also improves access to funding, often at more competitive rates.
Call Glenn to discuss your business insurance needs 1-888-256-8685 or email glenn@cuttherisk.com