Commercial Insurance: Protecting your personal assets against litigation

Starting a business from the ground up can be a daunting challenge when considering the amount of investment needed for start-up costs. Do I have enough money to get started? Where is the best location for my services and how much could I expect to pay for monthly rent? How much inventory do I need before I can realistically start selling to customers? Do I need to invest in commercial equipment at the outset? These are all questions we tend to ask ourselves as we begin the journey to business ownership. However, two of the most important questions we tend to leave out as a business owner of a new start-up is: Should I purchase business insurance and can I afford it.

Business longevity does not happen by chance. It takes a well thought out plan to ensure what has been planned, can actually be accomplished. And if you are planning to go into business without a commercial insurance policy, your losses can greatly exceed that of just losing your business. In some cases, it can cost you everything. This can include your home, vehicle(s), and any other asset you own.

As a business owner, protecting your assets should be a priority. It is important to know and understand which commercial insurance policies are beneficial and which policies are more than you need. Yes. It is possible to overinsure your business paying higher insurance premiums than what is necessary for risks that may not exist or for equipment coverage that exceeds its value.

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There are many types of commercial insurance policies depending on the industry of your business. Do you own real estate? If so, commercial property insurance protects you in the event your property is damaged from vandalism to natural disasters. Do you have a fleet of vehicles that transport clients to a job site? This type of insurance would require a commercial auto insurance policy that has the potential to protect you from a work-related accidents.

Here are a few other types of insurance policies that could prove beneficial to you depending on industry:

  • General Liability Insurance: Among the many types of commercial insurance, general liability insurance is the most commonly known and purchased policy available to business owners. General Liability Insurance policy’s are generally used against claims of bodily injury and property damage.
  • Business Owners Policy: Business Owners Policy or BOP Coverage consists of two primary policies which protects against both liability and property damages. However, BOP Coverage is restricted to those two policies and does not cover against workers’ compensation claims.
  • Commercial Package Policy: Commercial Package Policy or CPP is similar to a Business Owners Policy in its offering of multiple policy’s. However, BOP Coverage offers only property and liability while CPP allows you to choose the types of policit’s you would like to add to the package.
  • Professional Liability Insurance: Professional Liability Insurance policies are purchased for businesses that offer their level of expertise to clients. Professional services can be commonly associated with consulting and can be at-risk for lawsuits as a result of ineffective business advice or omitting important information in your work for a client.
  • Product Liability Insurance: If your business offers products as part of its services then purchasing Product Liability Insurance can protect your business in the event products are not manufactured correctly, which can result in injury to the consumer.
  • Commercial Umbrella Insurance: Commercial Umbrella Insurance policies are not designed to handle day-to-day exposures. CUI Policy’s are issued only when an underlying policy is in place. In the event an underlying policy is not in place, a self-insured retention applies, which requires the policyholder to absorb the cost of a certain amount of damages before the umbrella coverage kicks in.
  • Workers Compensation Insurance: Whether your business has one employee or 500, as a business owner you are required to have a workers compensation policy in place in the event an employee(s) is/are injured in the workplace due to negligence.

Never underestimate the importance of having the appropriate insurance and policy limits in place in case the unthinkable happens. Insurance policies can be inexpensive depending on several factors including the equipment value used for business purposes, the current amount of employees your business has, or the types of products you sell. Subsequently, no matter how much insurance policies cost, the cost of not having an insurance policy in place is a far greater cost than purchasing a policy itself.

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