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Small Business Insurance 101

Small businesses are fortunate that they can purchase a business insurance policy that groups a number of coverages into one package. One type of this insurance is called a “Businessowners Policy (BOP)”. This common policy includes all major property and liability insurance and much more, including business interruption coverage.

Interruption coverage kicks into gear after a disaster and compensates the business owner for any income loss. Disasters interrupt business operations and often involve a need to vacate the premises. It can get very costly if the company has to find a temporary location in order to stay in business. Interruption coverage covers those related expenses also.

Another advantage of a BOP is that the coverages can be customized to a company’s specific needs. For example, if a business relies on ecommerce for the majority of their income, coverage can be added to the policy to cover things like hackers and viruses interrupting commerce.

What constitutes a business being considered a “small business” to qualify for BOP? The Insurance Information Institute ( says the factors to be considered in determining if a business qualifies include: size of the premises; required limits of liability; type of business; and extent of offsite activity. “Premiums for BOP policies are based on those factors plus business location, financial stability, building construction, security features and fire hazards.”

What type of coverage should small businesses purchase? The following are some points to consider:

  • Property Insurance. This protects property you own or lease from all types of property damage, including fire and water leaks. It can be customized to include equipment, inventory, papers and records. This coverage is mandatory and required by landlords and mortgagors.
  • General Liability Insurance. Broad coverage is recommended here to protect your company from lawsuits. It is required when renting space or securing a loan.
    • Product Liability Insurance. If your company makes or distributes products, this is recommended.
    • Professional Liability. This would apply to businesses (doctors, architects, accountants, publishers, etc.) where customers (or patients) might pursue damages for real or perceived incidents.
  • Commercial Auto Insurance. This covers the costs resulting from auto accidents if an employee (or owner) is found at fault in an accident. It also helps compensate for property damage and medical expenses.
  • Workers’ Compensation Insurance. This provides benefits for work-related incidents. This is required for business with 4 or more employees.
  • Umbrella Insurance. Extra insurance that goes beyond the limits of the base policy.
  • Internet Business Insurance. This is specifically for businesses that do their business on the web. It protects against security and privacy breaches.

As you can see, there are plenty of options to add to protect your small business. Those mentioned above are only some of the more common ones. It’s important that you talk with your business insurance company who will advise you on what your particular insurance needs are.

This information is not intended to be exhaustive nor should any discussion or opinions be construed as professional advice.  Should you have any questions or would like to discuss your risk exposure with your company’s insurance, please contact the insurance pros at ARCW Insurance.  We are here to help.