Have a business? Get commercial insurance

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If you own a business without adequate commercial insurance coverage, you could be putting not only your company but also your personal finances at risk.

Just about every business owner needs some type of commercial insurance, though some insurance coverages may or may not be warranted, depending on the nature of your business.

The basic package

The basic lines of business insurance include property, general liability, business auto, worker’s compensation, business interruption and commercial umbrella. Business interruption insurance replaces income lost because of damage that temporarily shuts down a business, while an umbrella policy provides “an excess layer of liability protection,” says Lee Ramsdell, a Certified Insurance Counselor and Accredited Advisor of Insurance with Clark Insurance in Portland, Maine.

Many agencies offer a package of coverage called the business owner’s policy, or BOP, for a lower cost than you would pay to purchase each policy separately. Another option, the commercial package policy, lets the agent tailor the package to fit a particular business.

Insurance for special circumstances

Beyond the basics, one of the fastest growing categories of specialized business insurance is the protection of computer information and technology, according to Ramsdell. These policies can cover everything from equipment breakdowns to cyber crimes.

If your business has employees, Ramsdell recommends getting employment-related practices liability insurance.

“We’ve seen a rise in employment-related practices liability claims, where employees are bringing lawsuits against the employer, such as sexual harassment, wrongful termination or discrimination,” he says. “Defense costs tend to be very expensive; those cases tend to drag on for years.”

High-risk businesses — which can include startups and those in certain industries — may find it challenging to find affordable insurance coverage. They often must turn to what’s called the surplus line insurance market, where Lloyd’s of London is one of the best known insurers. As you might expect, the premiums in this market don’t come cheap.

The cost of coverage

“I would say for starters you would see probably a 25 percent increase in pricing, along with reduced coverage and benefits (in the high-risk market),” Ramsdell says.

Premiums for a basic business owner’s policy start at around $500 a year, according to Ramsdell. At that level, you’ll get some property, liability and business interruption coverage. Add another $1,000 for a business auto policy for one vehicle, $500 for workers’ comp insurance at a white-collar operation (an industrial business will pay much more) and $350 or more for a commercial umbrella policy.

Warning for home-based businesses

If you run a home-based business such as a day care center, hair salon or counseling service, don’t expect your homeowner’s policy to protect you in incidents involving your customers.

“The biggest consideration for any home business is that most homeowner’s policies will void coverage if they find out there was a business exposure in the house,” Ramsdell says.

Say, for example, your hair salon customer slips on the ice while walking out the door sporting her brand new perm. Your homeowner’s insurance carrier can deny your claim once it discovers the accident was business-related.

For more information

The National Federation of Independent Business has lots of advice on its website for buying commercial insurance. Another source is the U.S. Small Business Administration’s website Business.gov.

The SBA recommends that you review your insurance needs annually, as well as anytime you add new equipment or expand your business operations.