Running a successful business means facing many uncertainties that may be beyond your control. A single lawsuit or natural disaster can wipe out years of hard work and dedication. But having business insurance can provide much-needed peace of mind and a cushion to mitigate losses that may occur. As a business owner, it’s crucial to understand what a policy covers, the risks it mitigates, and its limitations to make informed decisions and avoid gaps in coverage.

What is business insurance?

Everyone is exposed to risks, no matter what type of business you’re in. Business insurance is designed to help protect you from unexpected events like accidents, lawsuits, or property losses that can cause your business severe financial setbacks.

What type of companies can get business insurance?

Businesses of every size and across every industry – from family-owned auto dealerships and hardware stores to neighbourhood restaurants and large retail chains – can benefit from policies tailored to their needs.

Can a sole proprietor get business insurance?

Yes, and they should seriously consider it. A sole proprietorship is an unincorporated business owned by just one person. Sole proprietorships are standard business setups for professionals such as freelance writers, graphic designers, photographers, and personal trainers. The risks these businesses face might be different than those of a restaurant owner or large retailer, but owners can be held personally responsible for financial liabilities, including lawsuits. Without business insurance, assets like an owner’s home, vehicles, savings, or investments could be at risk for a lawsuit.

Business insurance must-haves

Whether your business is a sole proprietorship or incorporated, a mom-and-pop shop or a conglomerate with locations from coast to coast, a few policies your business should consider purchasing are:

Commercial general liability (CGL) insurance

This type of insurance protects small, medium, and large businesses against claims by third parties if bodily injuries or property damage result from their business operations. For example, if you’re a personal trainer who works with clients in a home or mobile gym, this may apply to an injury your client receives during a supervised training session or the damage a dropped barbell does to a client’s marble floor.
The same sorts of lawsuits could also be filed against a national fitness chain.

In either case, commercial general liability insurance can cover legal fees related to third-party-initiated lawsuits. It can pay for any damages awarded, out-of-court settlements, as well as the cost to repair or replace damaged property, up to the maximum dollar limit of the business insurance policy.

Professional liability insurance

Advertising, consulting, real estate, IT, and various creative professionals and firms can all benefit from professional liability insurance (also known as errors and omissions (E&O) insurance). While CGL business insurance helps cover claims by third parties related to bodily injuries or property damage, professional liability insurance can help protect you from client or customer claims of losses resulting from incorrect or inaccurate advice, negligence, missed deadlines, copyright infringement, and more.

Commercial vehicle insurance

You should consider commercial auto insurance for every vehicle you perform a service with or use to transport goods, equipment, materials, tools, or employees. That can include cars, vans, trucks, and trailers your business owns and any non-owned vehicles used by employees such as your company’s sales team.

A typical commercial vehicle policy includes coverage for the following:

  • Physical damage to your vehicle (and work-related equipment or tools within it) resulting from vandalism, fire, or an accident.
  • Loss of your vehicle (and work-related equipment or tools within it) due to theft.
  • Medical expenses and lost wages incurred if you, your employees, or your passengers are injured in a collision or accident involving your business vehicles.
  • Liability protection for accidents with your business vehicles that damage other people’s property or that result in physical injuries to others.
  • Temporary car rental or vehicle replacement following an accident involving your business vehicles.

Commercial property insurance

Whether you start your day at a shared desk in a coworking space or you own an entire building, you can suffer damage to your place of business, your property, and even the property of your customers. Commercial property insurance can help cover the costs of repairing damaged structures and repairing or replacing damaged business furniture, computers, tools, and equipment.

Natural disasters, such as floods, fires (including wildfires), and wind-related weather (including storms, tornadoes, hurricanes, ice, hail, and lightning), can all cause substantial property damage. Different policies and providers offer different definitions of what is and isn’t a disaster and different levels of coverage for each. Review your commercial property insurance to decide if you’re satisfied with the range of coverage it offers against the forces of nature, and adjust it if you’re not.

Cyber insurance

Practically every business uses some form of computer, tablet, or mobile software or data storage solution. When a hacking or ransomware incident occurs, not only will your data need recovering, your reputation and balance sheet might as well. A cyber insurance policy can be crucial for all businesses, especially as the trend toward remote or hybrid work continues and as artificial intelligence (AI) capabilities grow.

Mending a cyber breach usually requires hiring specialist IT teams to find, identify, and remove the threat. They’ll also aim to restore both business and customer data. Without cyber insurance, the costs associated with this work could devastate your bottom line or put you out of business altogether.

Business interruption insurance

When things go wrong, sometimes getting back on track can take time. If your policy has business interruption coverage, it can provide financial support during temporary or prolonged closures. If your business success is tied to customers like large wholesalers or suppliers for just-in-time parts, adding contingent business interruption insurance can help reimburse you for lost profits and extra expenses caused by an interruption to the wholesaler’s or supplier’s operations.

Pollution liability insurance

Any company that produces pollutants, hazardous or otherwise, may require pollution liability insurance (also known as environmental impairment liability insurance). This could include companies involved in agribusiness, healthcare, chemical and pharmaceutical manufacturing, oil drilling, and more. Pollution liability insurance typically helps cover property damage, bodily injury, and clean-up costs that can occur during day-to-day business operations or after your company completes a contracted job. It goes above and beyond standard CGL and property policies, which can exclude coverage for environmental damage.

What does business insurance cost?

How much you pay for business insurance depends on the type of business you operate and the various insurance products you purchase. Other factors also play a role like your business location, the replacement costs for vehicles, equipment, and computers, and the age and integrity of the buildings you work out of. Managing risk proactively from the moment you open your doors to clients and customers will help reduce your business insurance costs.

Your business’s financial future is too important to risk.

Understanding your insurance options is an important first step to protecting your business. Federated Insurance provides policies for diverse companies, from independent building and electrical contractors, grocers, and fuel dealers to auto, marine, rec vehicle, and motorcycle dealerships.

Trust our dedicated agents, industry experts, and risk management specialists to develop a business insurance policy that lets your company focus on big ideas without sweating the small stuff.

Complete our online quote request form or call us at 1.844.628.6800 to get started with a free, no-obligation quote now!

This blog is provided for information only and is not a substitute for professional advice. We make no representations or warranties regarding the accuracy or completeness of the information and will not be responsible for any loss arising out of reliance on the information.