Business Insurance 101 – The Basics

The Right Business Insurance

As a new solopreneur, the first business insurance you should consider getting is a Commercial General Liability (CGL) Policy.  This is also one of the most important insurance policies you will ever get.

The CGL is designed to protect your business assets from claims of Bodily Injury (BI) and Property Damage (PD) arising from your operations, products, premises and completed operations.  Depending on what you do, there may also be coverage included for Advertising and Personal Injury (PI).

BI coverage works just like it does for your personal auto insurance.  If someone you interact with, in the course of business, happens to get hurt because of something that you do, on your premises or not, they have a claim.  The same goes for PD.  If someone has property that becomes damaged or you actually damage it, the Owner may have a claim.

Completed Operations coverage is a little different.  Let’s say you had a contract with a customer.  You completed that contract and 6 months after the job was completed, the customer is injured by your completed work.  This is where Completed Operations would protect you.  Some CGL policies will include this.  However, if you are a contractor or manufacturer of a product, you may need to purchase this separately to ensure proper protection.

If you do a lot of marketing and advertising of your business or product, Advertising and Personal Injury protection could be a very important coverage.  Remember, depending on your profession, this coverage may or may not be included on your CGL.  This policy will typically protect you from libel, slander and copyright infringement.

The second major type of business insurance you should consider is an Errors & Omissions (E&O) Policy.  This may also be known as Professional Liability.  This is an especially vital policy for anyone that consults, designs or provides any type of service.  Another common name for this is Malpractice Insurance for Doctors, Chiropractors, etc.

The main thing covered by an E&O is Negligence, actual or alleged.  This would protect you if one of your clients held you responsible for some product or service provided that did not meet the expected results.  Often, an E&O Policy will cover settlements or judgements against you, including defense costs.  Even if the claims against you are dismissed, there can be thousands of dollars in legal fees that might be too much for a Solopreneur to handle.

Everyone eventually makes a mistake.  E&O coverage is the best way to ensure that mistake will not put you out of business.  As with all business insurance, different companies have different coverages and options available.  No two companies are alike.  Always make sure to talk with your Agent, ask plenty of questions so that you understand exactly what you have for coverage and that it is the right coverage to meet your needs.

Next month I plan to talk about Commercial Auto Insurance.

Micheal Duba is an insurance expert and a licensed Agent with American Family Insurance. He specializes in Property, Casualty, and Life insurance, and is an active leader in the local business community.

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