Business Protections Series: Part 5
In Parts 1-4 of our Business Protections series, we addressed the legal issues surrounding formation of a company. But legal protection is only one of three major pillars of a successful and secure business. Beyond legalities, each successful business also needs sufficient commercial insurance to protect what you created. And beyond insurance, each business needs proper bookkeeping and accounting, to ensure all financial aspects are stable and accepted. In this portion of our series, we address the critical importance of maintaining business insurance, known as “commercial insurance.”
What types of commercial insurance does my business need?
In general, commercial insurance falls into a few categories: General Liability, Errors & Omissions, Directors & Officers, and Worker’s Compensation. There are other types of insurance, usually specific to industries, that you want have if needed. Depending on the type of business you run, you may need one or all of the different types. A qualified and experienced insurance broker can supply you with the best information about companies, coverage amounts, and rates, But for legal purposes, insurance is your safety net when something goes wrong. The coverage types are as follows:
- General Liability: Just like with a homeowners policy or auto policy, commercial general liability insurance covers losses (to the business or the consumer) due to acts outside of the business’ control. For example, if property is lost or damaged before it reaches the consumer; if there is an auto accident while on the job (your personal policy does not cover this!); if there is a fire, flood, or other incident that damages your office space.
- Errors & Omissions: Also called “malpractice” insurance, an E&O policy covers professionals when they make a mistake (e.g. misdiagnosis; defective legal documents). Obviously, doctors and lawyers use E&O insurance, but so do software professionals, trades people, realtors, and many others.
- Directors & Officers: When a corporation has a board of directors managing it, those directors have legal and “fiduciary” obligations to the business. If directors make a mistake, they need insurance to cover resulting claims from the shareholders, which is where D&O insurance applies.
- Workers Compensation: In every state, when an employer hires W-2 employees, the employer must maintain WC insurance to compensate employees in the event of any injuries on the job.
Who can help me?
A single claim can bankrupt a business, so every successful business assesses its insurance needs thoroughly. At Opfer | Campbell | Beck P.C., we have a network of high-quality insurance professionals that we will gladly share with you. Contact us today with any questions, and for more information about business planning in general, click here.