The typical business owner is only aware of the bare minimums of their business insurance policies. They know that they must have liability coverage and physical assets, such as vehicles and supplies, in order to be protected against acts of nature or vandalism. However, what many people do not realize is that there are a number of additional types of coverages that are available to business owners. These additional types of insurance coverage can often be more helpful than the basic policyholder’s policy, especially when it comes time to file a claim.
When an insured business owner thinks of personal property, they usually think of cash and accounts receivable. However, the insured business owner may also be covered with personal property, which includes items like desks, computers, clothing, tools, furniture, and other similar items. The cash value of these types of assets may be replaced after a loss, while the total value of accounts receivable is generally due at the time of a claim. Therefore, it is critical to review the terms of the accounts receivable and cash accounts and choose a policy that is most beneficial to the insured business.
Another type of coverage that most small businesses should consider is business insurance that protects against losses due to explosions, fire, and water. These explosion, fire, and water (often referred to as risk absorption) policies protect against disasters that can occur on-site and away from the business. Often, these types of policies will protect against damages that occur off-site as well, allowing the insured business owner to protect against disasters that may affect both his or her site and those he serves. Additionally, many policies protect against lawsuits, which can occur on-site, off-site, or both.
Along with offering protection from on-site and away-from-site risks, an insured business owner may also want to consider a surety bond protects against financial losses, including any court judgments against the business. A surety bond is often required by law before a business can operate, but this type of policy helps to ensure that financial losses are mitigated. A bond can also help to ensure that suppliers continue to supply products and services to the business, as many suppliers have insurance requirements as well. However, if the business owner does not own the majority share in the business, he or she will not be required to purchase a surety bond. For example, a sole proprietor does not need a surety bond in order to purchase supplies; however, if the business is majority owned by one partner, it must purchase a surety bond from another partner.
Many businesses choose to purchase both a surety bond when they insulate their business. By doing so, businesses are able to benefit from a combination of policies, all designed to meet their needs. For example, many surety bonds require the business to have an asset manager or an investment manager on hand to manage the policy. By purchasing a bond and a surety bond from the same insurance company, businesses are able to save money by allowing two companies to collaborate on a single policy.
In order to be fully protected, an insured business must always have the appropriate amount of liability insurance. Not only is liability insurance used to protect individuals in the event that they are injured on the property, but it is also often used to protect the assets of the business. The business owner may want to consider purchasing liability insurance in order to protect his or her real estate, equipment, inventory, goodwill, and accounts receivable. In addition to protecting these important resources, liability insurance is used to reduce premiums on an insured person’s auto insurance, to provide financial protection for the business owner if a product is defective, and even to reduce the amount that an uninsured person will pay when making a claim against an insured person.