Business Insurance: How to choose the right coverage

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Business Insurance: How to choose the right coverage

Owning adequate business insurance is essential to any type of enterprise. The proper insurance coverage will protect private and company assets in the event that any legal action is taken against the business. In order to select the right type of business insurance, it is first necessary to determine the actual coverage needs of the enterprise. There are several different types of insurance policies that business owners should be aware of when shopping for coverage. Property insurance
Property insurance provides protection coverage against loss and/or damages to the actual business facility and all of its equipment, furniture and other insured assets. In the event of a loss due to fire, flooding, theft or other incidences, all covered property, including the building, will be replaced. If the business is operated from a rented facility, the property owner will require all business tenants to own adequate property insurance. 

There are several losses that these types of policies cover. The more losses that are covered by the property insurance policy, the higher the premium will cost. There are two basic categories of property insurance:

Broad form 
The Broad Form insurance policies protect policy holders against several different kinds of disasters and will insure all property from identified causes stated within the policy.  Single or specific peril
Single, or specific peril coverage insure policy holders against the specified loss or the distinct peril outlined in the policy. The most common form of a single coverage policy is a separate fire insurance policy. There are several others that can be purchased, including coverage protection against terrorism. The most suitable property insurance coverage for small business owners include Broad Form policies. This comprehensive form of insurance coverage provides policies that are available in a range of affordable premiums. There are, however, many different types of small businesses that will require single peril policies, due to the nature of the business and the specific risks that are associated with its operations. If the risks are too high, the business owner may not be eligible Broad Form policies, making Specific peril policies their only viable option. 

Types of awarded damages

Property insurance pays damages or losses two different ways:  Actual Cash Value (ACV) 
The actual cash value is the amount the loss or damages are valued during the time of loss. Depreciation is factored into the ACV so if a piece of equipment that had an original purchase price of $250,000 has depreciated over a five-year period, then the ACV, at time of loss, could be calculated at $30,000. This is a major disadvantage regarding this type of coverage. Replacement value 
The replacement value refers to the actual amount business owners need to be reimbursed in order to replace the damaged or loss of equipment. Using the previous example, if the equipment that was lost had an original purchase price of 525,000, then this is the exact amount that will be reimbursed to the policy holder. This is often a preferred type of coverage to own, especially for small businesses, however, the premiums are higher than ACV policies.

Liability insurance

Liability insurance protects business owners in the event of a lawsuit. Various product liability cases or incidences that result in injuries caused by a company's neglect, can cause substantial financial loss if the business is not properly insured. It is essential for a business to limit their risks by having proper liability coverage. 

Commercial auto insurance

Commercial auto insurance protects companies from loss caused by their business vehicles. This is mandatory insurance to own for businesses that own commercial vehicles and fleets. Commercial auto insurance is normally a component of a larger insurance coverage package. Casualty Insurance 
Casualty insurance is commonly packaged with property insurance but the two policies differ in the kind of coverage they provide. Property insurance covers the physical locale of the company, whereas casualty insurance covers the business operations. The two together form a more comprehensive level of protection in the event of a natural disaster. Most insurance companies require companies to own additional casualty insurance in order to protect against specific kinds of losses, which include:
- Terrorism Coverage 
- Flood Insurance
- Government Instability
- Cyber-Liability  Workers' compensation
Any business that employs workers are required to purchase workers' compensation insurance. This form of insurance varies by state but as per common law, the employer is accountable for any injuries incurred by employees. Employees that have been injured on. the job can submit a claim to the company and they will pay for all of the associated medical expenses.

Business interruption insurance

If a business has to shut down operations due to a natural disaster, significant revenue can be lost. This form of insurance coverage protects businesses from financial loss as a result of not being able to conduct business. All fixed costs that are incurred while the business is shut down will be compensated. The revenue that a business would have earned is determined by prior financial records. Life and disability insurance
Life and disability insurance protects an enterprise in the event of the death or disability of the business owner. Additional disability coverage policies are created to supplement standard health insurance policies. Disability insurance policies provide several benefits that standard health insurance does not have such as:  Replacement of income
When a work is unable to perform their job, due to an illness or injury, this form of coverage offers a replacement income.  Out-of pocket expenses
Any expenses incurred by the employee such as co-pays and deductible are covered and reimbursed to the employee. Choosing the right business insurance coverage. 
There is a lot to consider when looking for the right type of business coverage. Major corporations also invest in policies such as Errors and Omissions, which is a form of malpractice insurance that protects companies from negligence claims. It is vital that business owners fully access their risks by consulting with a business insurance broker that can advise them regarding the various forms of coverage needed to fully protect an enterprise from financial loss.

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