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Business Insurance: A Safety Net for Your Business

You spent years working toward your dream of owning your own business. You researched and crafted a solid business plan, searched for the perfect space, hired the right people and opened your doors, ready and eager to serve your community. Now that you've realized your dream, how will you protect it?

Business insurance can help. The right combination of policies can help safeguard the financial, intellectual and physical assets of your business. Without the right insurance, a single incident, accident or loss could devastate all that you’ve worked so hard to build.

Q. How does business insurance work?

A. Like home or auto insurance, business insurance covers your risk, in this case, the risk of doing business. It ensures your financial protection in the event of a loss.

Some common types of policies include:

  • General liability helps protect your business from claims of bodily injury and property damage—think “things that could happen during normal business hours” like a customer falling on the front steps of your business or an employee causing damage to a client’s property while on the job. General liability also covers legal costs, judgments and settlements should your case result in a lawsuit.
  • Professional liability (sometimes known as errors and omissions insurance) covers “human error.” You could be the foremost expert in your field and still make a mistake. It happens to the best of us. Professional liability covers you and your company if you’re somehow deemed negligent, accused of misrepresentation or if you provide inaccurate advice on the job.
  • Commercial umbrella policies help you pay for costs that might exceed the liability limits of your other policies. It keeps you from paying out of pocket for things like medical bills, legal fees, judgments and settlements and damage to other people’s property.
  • Business interruption insurance will cover lost income for you and your employees, pay your lease, mortgage or rent and relocation costs (among other expenses) should a loss force your business to shut down temporarily.
  • Identity theft insurance provides liability coverage should your business suffer a data breach. It also may cover the cost of contacting customers who are victims of identity theft.
  • Workers’ compensation insurance, commonly known as workers’ comp, covers medical expenses and potentially lost wages for employees who become injured or sick on the job.
  • Commercial auto insurance, just like personal auto insurance, helps cover both property damage and medical expenses incurred in an accident if you or an employee is at fault. Commercial auto policies are necessary if you own, rent or lease vehicles, have employees who drive their own vehicles while conducting business or have employees who operate company vehicles.
  • Property insurance reimburses you if your property is damaged or destroyed due to fire, storm, or theft. If your business is home-based, find out if your homeowners' policy will cover your business property.

Q. How much business insurance do I need?

A. Need looks different for every type of business. Determining your need comes down to your individual business situation. You’ll likely want general and professional liability and, if you have employees, workers’ compensation insurance, as well. Same goes if you have employees who operate their own vehicles (or the company’s) for business purposes.

Determining how much you need depends on a number of different factors. Start with the basics and reassess as your business grows. What you may not have required (or purchased) when you started your business could change along the way.

Q. Is business insurance required?

A. Most business insurance is optional but, in some states, you might be required to have one or more policies like workers’ compensation or professional liability insurance.

But without business insurance, business owners might have to pay out-of-pocket for costly damages and legal claims against their company that could be financially devastating. Insurance premiums are a small price to pay to ensure some security for the business you’ve worked so hard to build.

Q. Is business insurance tax deductible?

A. In some instances, yes. If you’re operating a for-profit business, expenses considered “ordinary” or “necessary" can be written off. An “ordinary” business expense is considered a common cost of doing business. Necessary expenses are expenses considered appropriate for your business or industry. Insurance is technically both and can be written off according to the Internal Revenue Service.

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