Business Questions and Answers
Q. What Does Business Insurance (Typically) Cover?
A. Business insurance coverage for a commercial operation can include the following and more:
- General liability insurance: Covers third-party liability claims for injuries to other people.
- Professional liability and malpractice insurance: Covers professionals against loss due to negligent professional duty, wrongful acts, and advice and services that lead to another person’s loss or injury.
- Product liability insurance: Covers against faulty products and damage, illness, injury or death that may occur from using a faulty product.
- Property insurance: Covers loss and damage to your commercial business property due to fires, storms and other causes.
- Commercial vehicle insurance: Covers commercial vehicles and drivers for collision, liability, property damage, personal injury and "comprehensive" (now known as "other than collision").
- Workers' compensation: Covers your employees if they become ill or injured while working on the job.
- Loss of income: Covers business expenses such as rent and employee wages if you can’t operate your business.
- Key person insurance: Covers loss of income that may result from the head of the business or other key personnel becoming incapacitated or passing away (also known as key man insurance).
- Cyber crime insurance: Provides protection for risks due to Internet use and online communications.
- Records retention policies: Covers loss of important data and financial records.
- Specialty coverage: Insurance that covers various specific business risks, such as those of landlords, farmers, and commercial operations that put on one-day events such as seminars or concerts.
Q. Is Business Insurance Tax Deductible?
A. Business insurance is tax deductible, as long as the coverage is for the purpose of operating a business, profession or a trade. Businesses may not deduct their business insurance premiums if the coverage is for the purpose of a self-insurance reserve fund or a loss-of-earning insurance policy.
Q. Is Business Insurance Required by Law?
A. Business insurance is required by law. The following is required if it is applicable to your situation:
Unemployment insurance: Applies to a business that has employees and may be obligated to pay unemployment insurance taxes under prescribed conditions; if these conditions are applicable to your business, then you must register your business with the state work force’s agency.
Workers' compensation insurance: If your business has employees, you are most likely legally obligated to carry workers’ compensation insurance, either on a self-insured basis or through a commercial insurance carrier or a state workers' compensation program. Workers' compensation laws vary by state.
Professional liability insurance: Some states require specified professionals to carry insurance against professional liability.
Disability insurance: Several states, including California, Hawaii, New Jersey, New York, Puerto Rico and Rhode Island, require that a business have partial wage replacement insurance coverage for employees eligible for non-work related injury or illness.
Q. What Does General Liability Insurance Cover?
A. General liability insurance provides insurance protection for a company’s assets, financial obligations, legal defense, and any settlements or judgments awarded to an injured party. It may also include claims for copyright infringement, false or misleading advertising, or libel and slander. If a patron is injured in some way in the course of doing business with your company, your general liability insurance will provide coverage.
Q. What Is Errors and Omissions Insurance?
A. Errors and omissions insurance (or "E and O") covers a business for a service rendered that did not have the expected or promised results, or that results in a loss or personal injury suffered by the person receiving those services. It also covers situations where the individual or company failed to render service at all. These are known as errors and omissions. As an example of errors and omissions insurance, if a financial advisor provided investment advice that resulted in a client’s financial loss, those circumstances could result in an errors and omissions liability claim.
This type of insurance is also known as malpractice insurance (for medical practitioners) and professional liability insurance for practicing lawyers and other professionals.
Q. What Is a Business Owner’s Policy?
A. A business owner’s policy, or BOP, is insurance coverage designed specifically for small or medium-sized businesses. Depending upon the insurance company, the size of business that qualifies for a business owner’s policy may be based on revenues or number of employees. A BOP combines several types of insurance coverage in a packaged format, and can be customized to suit a particular business. Generally, this type of policy includes both property and liability coverage.
Policies may also provide coverage to include the following:
- Property claims
- Breakdown of equipment
- Loss of income/business interruption
- Professional liability
- Copyright infringement
- Products and completed operations
- Premises liability