Small Business Insurance Key Terms

Understand the different types of small business insurance

Every business owner needs to purchase insurance for his or her business to guard against losses. The hard part, of course, is trying to determine which types of insurance your business really needs. Knowing this can be important because an insurance agent may try to oversell you. For example, if you don't have any employees, you don't have to purchase workers' compensation insurance. Knowing these things can make a big difference in how much you pay for insurance.

Errors and omission (E&O)

Errors and omission or E&O insurance helps protect you against lawsuits where a client believes you to have made an error. It's a good idea for all businesses to hold errors and omission insurance.

Business property insurance

Business property insurance covers all the physical aspects of your business and will protect them in the case of theft, fire or other natural disasters. Even small business owners that work from home can purchase business property insurance if they want to protect the goods that they use for their business.

Liability insurance

If someone decides to sue you for negligence, you'll be happy to have a liability insurance policy. This protects businesses against any harm that their actions may cause, and all businesses should carry it. Most insurance companies have special packages for different types of businesses. For example, the liability insurance needs of a surgeon and an accountant may be quite different.

Workers' compensation insurance

If your business has employees, then you should purchase workers' compensation insurance. Sometimes called workman's comp, this insurance covers employees that are injured while working. Check your state's laws regarding the level of workers' compensation insurance that you must carry, as the laws vary by state.

Employment practices liability insurance (EPLI)

Employment practices liability insurance (EPLI) covers employers in the event that an employee sues them for violating legal rights. Such cases may involve sexual harassment, wrongful termination or discrimination, among many others. While this typically happens within large corporations, it's still a good idea for all businesses to carry it.

Business disability insurance

Business disability insurance can protect you from losing income should you become unable to work due to illness or disability. It can also protect you should you lose one of your employees to disability.

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