Insurance for Businesses: What Coverage do you Need?

Scrabble letter tray with the word "RISK"

If you have a business – small, medium or large – you need insurance to protect your business from the risks that it is most likely to encounter. However, the different types of policies and coverage available can be very confusing.  This post provides an overview of what is available and what to keep in mind.

  1. Commercial General Liability (“CGL”) Coverage. The CGL policy is the backbone of business insurance coverage.  It protects your business if someone is injured on your premises, or is injured by a product or service that you provide.  It also will usually cover the costs of your defense if you are sued. A CGL policy can be bought by itself, or as part of a “package” of coverage in the form of a Business Owners Policy (“BOP”) or a Commercial Package Policy (“CPP”). These package policies typically combine general liability coverage with property insurance that covers damage to property and equipment that your business owns or leases.
  2. Umbrella Liability. This policy provides an “umbrella” of coverage above the limits of your CGL policy. It is usually fairly inexpensive, and will come in very handy if your business suffers a large loss.
  3. Worker’s Compensation. This is required by state law if your business has employees, and covers medical bills and lost wages for employees who are injured or killed while on the job. You may also be able to obtain employment practices liability coverage through your worker’s compensation policy, to protect your business from claims such as sexual harassment or discrimination.
  4. Professional Liability Insurance. If your business provides any type of professional services, then you need this insurance, which is also known as Errors and Omissions (“E&O”) insurance. Many states require professional liability insurance for doctors, lawyers, and other professionals. Accountants, architects, engineers, investment advisors, IT and software consultants, and sales agents should also consider this coverage, even if not required by state law.
  5. Life and Disability Insurance. You need life and disability coverage on yourself and key personnel to replace at least some income if key personnel die or become disabled.
  6. Property/Casualty. If not purchased as part of a BOP or CPP, and your business owns any property, then you should have property/casualty insurance. You can think of this as homeowner’s insurance for businesses. At least two types are available, “all risks” (which are intended to cover all types of issues), and “named peril,” which cover only specifically named issues.
  7. Additional Coverages. There are any number of additional risks against which you may need to insure, depending on the type of business you are in. These include, for example, Directors and Officers Liability coverage (“D&O”); Pollution Liability; Business Income or Interruption; Product Liability, Recall and Contamination; and Cyber Liability.

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About the Author

Alan M. Ruley

Alan Ruley is a seasoned civil trial and appellate lawyer. He represents clients in a wide variety of disputes in federal court, state court, and the North Carolina Business Court, focusing primarily on business litigation, intellectual property, insurance coverage and recovery, banking and employment.
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