What is Business Insurance?

Business insurance, as with all insurance including health, life, auto and others, is a sharing of risk against future potential loss. Insurance involves a contract between an insurer and an insured in which the insurer promises to indemnify and financially reimburse the insured in the event of a covered loss. This promise is made in exchange for a premium payment proportionate to the perceived amount of risk involved.

Why Business Insurance is Important

Operating a business typically involves significant investment and, depending on the type of business, may involve significant financial risk. Good business insurance coverage is one way you can help minimize risks you may face. While the law generally doesn't require that you, as a business owner obtain business insurance, in North Carolina if you have three or more employees you're legally required to carry worker's compensation insurance. Any vehicles used as part of your business operations must also be insured, with commercial vehicle coverage recommended.

Liability - A Major Concern

There are many types of business insurance coverage that, although perhaps not required by law, are important for you to have in order to protect yourself against property damage, liability lawsuits and other claims. Here are some of the more common types of coverage available:

• Key Person Insurance – this is a policy that pays compensation for potential financial losses arising from the death or long-term incapacitation of the covered individual, considered key to ongoing profitable business operations.
• General Liability Insurance – also called commercial liability insurance, this protects against financial loss as a result of liability claims for injuries or damages to others by you or your employees. This includes bodily injuries caused by negligence, and accidents stemming from personnel or other causes. It also covers personal injury claims such as libel and slander.
• Product Liability Insurance – this coverage protects companies that manufacture, distribute or retail products in the event that a product is deemed defective or unsafe and causes damages, bodily harm or injury.
• Commercial Property Insurance – this coverage is protection against loss from property damages resulting from perils such as fire, severe storms, vandalism, etc. These policies may be peril-specific, covering only perils listed, or all-risk, covering all perils except those specifically excluded.

If you operate a home-based business you will likely need separate insurance for protection against losses not covered by your homeowner's policy. This may include professional and general liability coverage.