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10 Different Types Of Business Insurance and Their Uses


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There are many different types of business insurance that you can take out. These different policies can protect your company against various different risks.

Some of these policies could be useful to invest in depending on the nature of your business. Some may even be required by law in certain circumstances. Below is a guide to some of the most common business insurance policies and their uses.

Worker’s compensation insurance

If you hire employees, it is a legal requirement to take out worker’s compensation insurance. Worker’s compensation insurance offers financial compensation to any employees that are injured or made ill due to work-related reasons. It can help to fund medical expenses and cover lost wages, as well as offering compensation to family members in the case of a work-related death.

Worker’s compensation insurance rates are largely calculated based on the risk of injury/sickness in your workplace. You can lower rates by providing a workplace safety program, as well as a return to work program. You should also make sure that every individual employee is given the correct classification code based on their role (different roles carry different risks and can affect your overall rates). Worker compensation insurance claims will increase your rates, so you should also try to minimise claims by offering good training and improving general health and safety at work.

Commercial vehicle insurance

Need to drive a vehicle for work? It’s important that you are insured to drive this vehicle. If you have employees that drive vehicles, they too need to be insured. Like workers compensation insurance, this is a compulsory insurance scheme. However, the extent of your cover is optional. The most basic coverage required is third party only. However, you may wish to broaden your policy by also covering accident damage to your vehicle, fire damage, theft/vandalism costs, breakdown assistance or even general repairs. Different vehicles require taking out different insurance schemes. If you need to insure multiple drivers on multiple vehicles, it’s worth taking out fleet insurance.

Commercial vehicle insurance rates are determined by various factors. Introducing driver training programmes, installing cameras on vehicles, storing vehicles in a secure location and choosing safe/secure vehicles will help lower your rates. Choosing drivers with a good driving record and low claims history is also important for lowering rates and preventing accidents – for this reason, it’s worth vetting all drivers before hiring.

Company health insurance

Company health insurance is one of the most popular employer benefits for retaining employees. This insurance scheme allows your employees to seek out compensation for medical expenses. It saves your employees the cost of having to take out personal medical insurance or having to pay for medical treatment out of their own pocket. Unlike worker’s compensation insurance, it covers non-work-related medical expenses. There are many different levels of cover available and it could be worth working with employees to choose the right plan for their needs.

Your company health insurance rates depend on the health of your employees. If you’re hiring young and healthy employees, you’re likely to pay better rates (although this shouldn’t be a reason for applicant discrimnation). You can also take steps to keep your employees healthy by paying for flu shots, cancer screening, gym memberships and even helping employees quit smoking. Other measures like setting up health savings accounts (HSAs) for employees to spend on medical expenses may also reduce your company health insurance rates.

Commercial property insurance

Commercial property insurance covers you against damage to your building. This includes fire damage, flood damage, storm damage, damage from burst pipes and often damage from burglary/vandalism. It can help you to pay for repairs. If you rent or own physical premises such as an office, store or factory, it can be useful to have. Coverage can vary between different providers. Some may even cover loss or damage to contents.

If you don’t want to pay expensive commercial property insurance rates, it’s worth taking some measures to secure your property from disaster. Fire safety and security measures can often reduce your rates. It could be worth organizing risk assessments to help you identify potential dangers.

Cyber insurance

Also known as cyber liability insurance, this insurance scheme helps to offer compensation for any financial damage you sustain during a cyberattack. This could include paying ransoms, covering loss of income and compensating any clients or employees that may have been affected. Almost all companies that rely heavily on computers and digital devices can benefit from this insurance scheme.

How do you reduce cyber insurance rates? By investing in strong cybersecurity measures. Taking steps such as outsourcing managed IT and using secure cloud storage systems are good examples.

Public liability insurance

If you accidentally injure a member of the public or damage their property while working, public liability insurance can provide compensation to this person so that they can pay for medical treatment or repairs/replacement of property. Any company that physically interacts with customers or the general public can benefit from taking out this scheme. Most schemes will cover everything from personal injury claims from slip and falls to accidental damage to someone’s home during a plumbing accident, however coverage can vary.

You may be able to save money by seeking out public liability insurance specialized to your industry. These schemes ask you safety questions related to your industry to help gage how much of a risk your business is. Putting in place specific safety measures like using certain tools or undertaking certain training could reduce your rates.

Product liability insurance

Product liability insurance is a specific type of public liability insurance that may be worth taking out if you sell products. If your product is faulty and causes injury to someone or damage to their property, this insurance scheme will provide compensation to that customer. This could include a defective food product causing food poisoning or a defective electronic product starting a fire. Be wary that product liability insurance usually only covers you for products you have manufactured and not products supplied by a third party.

Your rates are likely to depend on the type of products you sell. By making sure that your products go through certain recommended safety tests, you may be able to reduce your rates for this insurance scheme.

Professional indemnity insurance

Professional indemnity insurance covers you against any financial loss you may cause clients as a result of mistakes. It is different to public liability insurance, which covers injury and property damage to clients – instead, professional indemnity insurance provides cover for costly failed promises such as a delayed project or poor advice. It can also cover costs caused by reputational damage such as a bad marketing strategy or accidentally leaking the sensitive documents of a company. This insurance scheme tends to be better suited to service-type industries.

Like public liability insurance, there are policies you can take out specific to certain industries. Professional indemnity insurance rates take into account various factors from your online reviews to the quality of your legal contracts. Some companies may even charge you more if you are impolite when talking to an insurance company rep on the phone.

Business interruption insurance

Business interruption insurance covers you against loss of income during a disaster. This disaster could include a fire, a cyberattack, a flood, a power outage or even personal sickness. If you think there’s a risk of any of these disasters occuring, it could be worth taking out this insurance. Different policies will cover you against different disasters, so it’s worth shopping around for one that is best suited to your business.

Business interruption insurance rates are typically calculated based on the risk of your business encountering a disaster and the amount of monthly income your business receives. You may be able to reduce rates by putting in place certain measures to ensure continuity during a disaster. This may include using cloud storage or having a backup power generator.

Directors and officer’s insurance

Directors and officer’s insurance covers you against lawsuits made against key managers within your company. This typically involves lawsuits for breach of trust or breach of duty. If you have a team of managers working for you, it could be worth taking out this insurance scheme to protect your company if one of these managers acts negligently.

This type of insurance is fairly bespoke and rates are set by analyzing each of your directors and officers history and behavior. By hiring trustworthy managers that have completed background checks, you can usually ensure low rates for this type of insurance.

Which ones should I opt for?

While taking out lots of different insurance schemes can protect you against an array of risk, the cost of each of these policies could soon add up and become unaffordable. This is why it’s important to prioritize the schemes that cover the biggest risks to your company.

In some cases, you may be able to reduce the cost of taking out multiple policies by opting for packages. Bear in mind that some insurers may use different terms for some of the policies listed above (worker’s compensation insurance for example is sometimes referred to as employer liability insurance, but covers the same risks).

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