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June 2017
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Small Business Insurance 101
The basics of business insurance

Insurance for a small business comes in many forms, and finding the best solution for your business requires some serious consideration. No business owner wants to waste money, and itís true that not every business needs every type of insurance, but it is critical to have enough insurance to adequately protect your business and personal assets from all applicable risk.

Here is some information to help you understand the basics of business insurance.

The first thing to bear in mind is that running your business from your home doesnít exempt you from needing insurance. Often, a homeownerís insurance policy wonít cover losses related to certain business activities, and the losses that are covered may be capped at an amount that is reasonable for homeowners but not business owners. For instance, consider the difference in the financial impact between losing the files on your personal computer and losing the files on your business computer. If you plan on running a home business, you should talk to your homeownerís insurance provider right away. Not only can you find information about potentially adding a rider (add-on provision) to your policy for more coverage, but you can also ensure that you donít actually invalidate your policy through your business activities.

You can start your research into business insurance by looking at the coverage offered by a business owners policy (BOP). This offers comprehensive coverage that can be valuable for many business owners. However, it is typically the case that a business will need supplemental coverage to ensure that it is adequately protected.

Not only do BOPs differ in what they cover and exclude, but they are also designed to cover the risks that most businesses face, and therefore arenít likely to cover risks that are specific to certain geographic areas and business types. Typically, you can expect a BOP to include coverage for property, vehicles, general liability and business interruption.

Another important type of insurance to consider is commercial property insurance. It comes in two types: all-risk and peril-specific. All-risk policies protect your property against a wide variety of perils that business owners commonly encounter. All-risk policies typically cover all risks except those specifically listed in the exclusions.

Peril-specific insurance, on the other hand, only includes coverage for risks specifically described, and excludes anything not listed. These policies are useful for businesses that have particularly high risk of a certain type, which could be due to their location or business type. Peril-specific insurance is often needed for a specific type of risk that an insurance provider feels is too expensive to cover within an all-risk policy, such as flood insurance in coastal areas that frequently flood. It can also be a way to save money if your business has risk in only a few areas that can be covered with peril-specific policies adding up to less than the cost of an all-risk plan.

ďAll-risk insurance is obviously the most comprehensive type of coverage available,Ē according to Investopedia. ďIt is therefore priced proportionately higher than other types of policies, and the cost of this type of insurance should be measured against the probability of a claim.Ē

Liability insurance is another critical type of coverage you will need to do business. There are several different types, but two you should look at first are general liability insurance and professional liability insurance. If your business sells a product, you may also need to carry product liability insurance. You can learn more about these types of liability insurance and find further information about the types of insurance your business may be legally required to carry at

You worked hard to build the value of your business--donít let an unfortunate event undo your hard work. Talk to your financial institution or insurance provider today to determine your risk and to find out whether or not you are adequately covered.


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