What is business insurance?

Business insurance basics

Much like personal insurance, business insurance is designed to offer protection against certain losses. The basics of business insurance are simple: businesses pay premiums to an insurance company and in the event of a loss of something covered by the policy, the insurance company will repay the business for that loss.

Businesses are at risk in several ways. For example, if a natural disaster prevents a business from operating, income can be lost. Or if the building a business owns and the office materials inside are damaged by fire, a business will probably need money to rebuild and restock. Or if a vehicle owned by the business is involved in an accident, insurance can help pay both for the damages and any costs to injured third parties.

Businesses are also at risk of being sued by injured and/or disgruntled parties. Businesses can be sued for various things, such as a customer slipping and falling in a store. An employee who is hurt while working for a company can also opt to sue the business in some cases.

Liability insurance, which covers businesses for lawsuits and injuries caused to third parties, usually includes payment of attorneys’ fees and coverage of medical expenses of individuals injured by the business. Both of these are the kinds of costs that can escalate quickly, and insurance coverage is critical.

Small- to medium-sized businesses may be able to purchase something called a Businessowners Policy. This type of policy combines coverage for several types of business insurance into one package.