Owning and operating a business is a risky endeavor. Not only do business owners face general risks such as theft and fire, but also specific risks that are inherent to the operations of each individual business.
To help you get the coverage you need, the Insurance Information Institute (I.I.I.) has developed the following list of questions every business owner should consider when determining their insurance needs. For further information on common coverages, see Small Business Insurance.
1. Do I have enough insurance to rebuild my business property and replace all of my merchandise and possessions?
A Building and Personal Property Coverage (BPP) policy covers any combination of the following three categories: the building, your business personal property and the personal property of others. The covered building can be owned by the insured, or it can be leased.
Business personal property includes
- Furniture and fixtures
- Machinery and equipment
- Stock
- All other personal property you own that is used in your business
- Labor, materials or services furnished or arranged by you on the personal property of others
- Improvements you have made while a tenant
- Leased personal property that you are contractually obligated to insure
2. Do I have enough insurance to protect the personal property of my employees?
Adding Personal Effects and Property of Others coverage to your policy will extend up to $2,500 worth of its business personal property coverage to your personal effects, as well as that of your partners, staff, and others in your care, custody or control.
The personal effects coverage does not include theft, even if theft is a covered cause of loss.
3. Do I have enough insurance to keep my business open?
Closing a business down completely while needed repairs are being made could spell financial ruin. That’s why you should have Business Interruption insurance.
Types of business interruption coverage
- Business Income Coverage – If your company has to vacate the premises because of disaster-related damage that is covered under your property insurance, Business Income Insurance will compensate you for the profits you would have earned, based on your financial records, had the damage not occurred. The policy also covers expenses that continue even though business operations are temporarily stopped.
- Extra Income Coverage – Provides reimbursement for a reasonable sum of money spent over and above normal operating expenses to avoid closing during repairs.
- Contingent Business Interruption Insurance – Protects your earnings if your suppliers or customers suffer physical loss or damage to their property.
4. Do I have enough insurance to protect my assets in the event of a lawsuit?
A Commercial General Liability (CGL) policy covers claims in four categories of business liability. These categories address common third-party exposures your business may face.
Commercial General Liability typically covers
- Bodily injury
- Property damage
- Personal injury (including slander or libel)
- Advertising injury
Commercial General Liability policies also cover the cost to defend or settle claims.
You may also consider a bundled option that combines property and liability coverages; learn more about this approach at Business Owners Policy (BOP).
Frequently Asked Questions
How do I determine the right amount of coverage for my building and contents?
Start by inventorying your property and estimating replacement costs, and review recent financial records to estimate income you would lose if operations stopped.
Does business interruption insurance cover payroll?
Business Income Coverage can cover ongoing expenses such as payroll if those costs continue while your business is closed due to a covered loss.
Is theft covered under personal effects coverage?
Personal effects coverage for employees typically excludes theft unless the policy specifically lists theft as a covered cause of loss.
Will a CGL policy pay my legal defense costs?
Yes, Commercial General Liability policies generally cover the cost to defend or settle covered claims, subject to policy terms and limits.