Business Insurance FAQs
- What is Business Insurance?
- What does it do?
- How Does It Work?
- Is it Tax Deductible?
- Is It Required by Law?
- Do I Need Business Insurance?
- Does it Cover Embezzlement?
- Does a Business Policy Cover Flood or Water Damage?
- Does a Business Policy Cover Lawsuits?
- Is Business Liability Insurance the Same as Workers Compensation Insurance?
- What is a Certificate of Insurance?
- I drive for Uber/Lyft, do I need a Business Policy?
What is Business Insurance?
Sometimes referred to as commercial insurance, this is a policy that covers a business against risks or losses that might occur during the course of doing business. It encompasses various policies that offer coverage for property damage, employee-related risks, and legal liability.
What does it do?
The purpose of this insurance policy is to keep you in business in the event of an unforeseen situation that might inhibit your ability to do your operations.
How Does It Work?
Business policies are contractual agreements between a commercial entity and an insurance provider. The agreements’ stipulations state that the insurance carrier shall share part of the risk with the entity. In exchange, the business agrees to make premium payments to the insurance company after a set duration. If a covered loss materializes, the business will file a claim and pay a deductible, and then the insurer will pay for the loss incurred.
Nevertheless, the insurance company does not pay right away, they first conduct an investigation to check the extent of the damage so they can process the claim. This is what allows them to know how much they should pay as compensation for the loss.
Business Insurance Cost
Business insurance cost varies due to factors such as the type of the business, as well as the type of coverages needed for their operations. For example, a home-based business can be insured for as low as $500 per year while a large organization with many employees and resources could pay as much as $500,000 per year. Nevertheless, one can lower these costs through proactive risk management practices while comparing quotes between different insurance firms.
Is it Tax Deductible?
Business policies are usually tax deductible. This holds true as long as the coverages provided are for commercial purposes only.
Is It Required by Law?
Business policies are required by the law in certain situations. These situations include:
- Workers Compensation Insurance
If you have employees, the law demands that you have a workers compensation insurance policy. This policy can either be from the state’s workers compensation program or self-insured.
- Unemployment Insurance
There are specific conditions where a business that has people under its payroll is required to pay unemployment insurance taxes. Check whether those conditions apply to your business then register it at the workforce agency.
- Professional Liability Insurance
Certain states require that some professionals have insurance against professional liability.
Do I Need Business Insurance?
Yes, any commercial operation needs to be covered. However, the type of coverage you need is dependent upon your situation. Nevertheless, the majority of small businesses need commercial property insurance, commercial general liability insurance, and business interruption insurance. When combined, these three policies form the most popular type of small business commercial insurance known as the business owner’s policy (BOP).
Let us look at them in a bit more detail:
- Commercial Property Insurance
This policy provides coverage for all assets owned by the business such as buildings, equipment, vehicles, and inventory. The type of perils covered by this policy includes theft, fire, vandalism, and specified natural disasters.
- Commercial General Liability
This policy protects the business against third-party claims for bodily injury, medical payments, property damage, and defamation. This is the most common policy among small businesses.
- Business Interruption Insurance
This policy is applicable to businesses that need a physical location for their operations. It compensates the business for loss of income that follows an event that hinders the business from carrying out its normal operations. This includes situations such as power outages.
Does it Cover Embezzlement?
As mentioned previously, commercial property insurance provides you with theft/crime coverage. As such, it will also cover embezzlement or fraud by employees. However, there are more specific types of employee dishonesty coverages. For instance, you can purchase fidelity bonds that protect the business against dishonest practices by certain employee or all employees.
Does a Business Policy Cover Flood or Water Damage?
For your business policy to offer you coverage against flood damage, you will need a separate coverage that insures against flood. A standard commercial property insurance policy provides you with coverage against specific water damage situations with the exception of flooding. Moreover, water damage coverages vary between insurance carriers, as such, you need to compare different companies to get the one that suits your needs best.
Does a Business Policy Cover Lawsuits?
As mentioned in the commercial general liability section, this policy covers the business against lawsuits from third parties. However, the extent of the coverage depends on your specific policy. If you are looking for a liability policy that gives you coverage against extreme circumstances, you should consider going for the commercial umbrella liability policy. It will cover you against extreme lawsuits such as those exceeding $1,000,000.
However, the carrier will always carry out investigations to ensure that the injury you are being sued against was not a result of your negligence or the suing party’s intentional act.
Is Business Liability Insurance the Same as Workers Compensation Insurance?
Your general liability insurance policy does the following:
Protects third parties that come into come into contact with the business such as customers and vendors. If they get injured in the business’s premise, it will pay for their medical costs.
Protects the business against lawsuits from third parties.
Workers compensation does the following:
Protects you and your employees. Thus, will pay for any medical costs, lost wages, and death benefits if any member of the organization gets injured while on the job.
Handles lawsuits made against the business by its employees due to injury, illness, or death.
Business liability insurance deals with third parties that come into contact with the business and its employees while workers compensation protects you and your employees against injuries that may occur while on the job.
What is a Certificate of Insurance?
This is a document handed to the business by its insurance provider as proof of an existing insurance policy. The certificate of insurance also contains the key aspects and conditions of the policy.
Errors and Omissions Insurance
Commonly referred to as ‘E and O’, it is a policy that covers a business against services rendered by the business that did not yield the desired outcome or resulted in injury for the individual receiving the services. The policy also covers cases where the company or employee did not render those services at all.
While Uber and Lyft require that their drivers have personal car insurance that exceeds state minimums, they do not require that their drivers have commercial insurance.
The personal car insurance policy covers the driver but not their passengers. This is because auto insurance companies refuse to let the driver’s coverage to extend to their passengers if they were driving for hire.
To circumvent this obstacle, Uber and Lyft have designed special insurance policies which provide coverage for the passengers or pedestrians if the driver is at fault. This coverage is only effective if the driver is logged into the app. If they are not, then their car insurance policy will have to pay for the damages.
Moreover, if they are logged in, any accident that is the driver’s fault will only pay for the passengers and pedestrians involved but does not cover the Uber or Lyft driver.