A brief look at business insurance basics

Like General insurance, business insurance can protect a business, its owner and its employees against losses incurred from covered perils. Such insurance generally is comprised of several types of liability insurance coverages and commercial property insurance as well as errors and omissions insurance coverage for some business professionals, such as insurance agents and brokers.

A general liability insurance plan is a type of commercial insurance that protects commercial enterprises and their owners and employees against legal troubles and potential financial settlements arising out of work-related incidents. A general liability insurance plan can help insure a business and its owner and workers against financial settlements arising from defamation, medical costs, property damage, bodily injury to others, legal defense costs and other expenses arising from a covered peril.

Product liability is another kind of business insurance often used for commercial operations that manufacture, sell or distribute products that might be hazardous in nature, such as a flammable product or a small home appliance, for example. If a product has a defect and causes injury or death, a product liability insurance plan likely would cover any legal, medical and other costs up to policy limits. The exact type of product liability insurance needed depends on the nature of the business being insured, as does the amount of coverage. A medical doctor, for example, might need a great deal of medical malpractice insurance, which is a kind of liability insurance for medical doctors, surgeons and other practitioners.

Professional liability insurance is a type of insurance that protects business owners and their employees against damages caused by errors or omissions made while conducting business. If a contract somehow is voided by an error, for example, and a client or customer were to suffer some sort of financial loss as a result, professional liability insurance would pay up to policy limits for covered perils. Also called errors and omissions insurance, the insurance plans are most useful for licensed business professionals, such as doctors, attorneys, insurance agents and brokers and other state and federally licensed professions. Many states have laws that require certain licensed professionals to carry minimum levels of errors and omissions liability coverage.

Every good business insurance plan should include some sort of commercial property insurance coverage, which insures against the damage or loss of business equipment and property caused by covered perils, such as fire, wind and hail damage, falling objects, internal and external flooding, crime and other perils. Most commercial property insurance plans are tailored for the specific business needs and potential perils, which can vary greatly in type and price. A business that is located in a high crime area likely would cost more to insure against damages from crime. A business located next to an active fire station likely would have lower fire insurance costs.

Home-based insurance is another type of commercial property insurance for businesses that are run out of a private home, such as an Internet-based business or a home-based accounting business. By Mike Heuer