Are Small Businesses Required to Carry a Business Owners Policy?

When running a small business, you will find a range of risks that you may not have anticipated. Although your business may be smaller, you can still stand to lose a lot in income and security when it comes to an accident or lawsuit. In fact, most small businesses don’t have the financial cushion to handle a lawsuit or heavy loss that large businesses do. 

This is why small business owners tend to invest in a business owners policy. Although this insurance isn’t typically required by law, it is an important resource to protect small businesses. 

At its most basic form, a business owners policy covers general liability and commercial property damage. General liability insurance covers accidents of bodily injury and property damage that may occur on your business’ property. Commercial property insurance covers your business’ physical structure and its contents in case of fire, wind, hail, lightning, smoke, theft, vandalism and more. 

Neither of these insurance policies are required by state or federal law. There are times where you may be required to carry these insurances to work on certain projects or with certain clients, however. To sign contracts, a client may require that you at least carry general liability insurance to cover accidents that may affect them financially. 

If you take out a loan or rent your business’ property, you may be required to carry insurance by your lender or landlord. This is in part to protect them from liability in case an accident occurs on the business property or your business’ equipment is damaged. 

Who Needs a Business Owners Policy? 
Business owners policies are geared to protect small businesses across low-risk industries. Any small business that wishes to combine coverages and save money should consider purchasing a business owners policy. 

These policies don’t only cover general liability and commercial property, either. They can be expanded to include coverages such as: 

• Professional liability insurance covers accidents of professional negligence not covered by general liability. This insurance protects your business from claims regarding mistakes that may cause a client to lose money. 
• Employee practices liability often comes as part of a directors and officers insurance policy, although it can be purchased on its own. It covers the business from claims regarding employment practices such as discrimination, wrongful firing and hiring, sexual harassment and more. 
• Cyber liability covers your business in case of cyber attacks and loss of electronically kept information. 
• Commercial auto insurance covers vehicles owned or used by the business for work purposes. This insurance can include comprehensive coverage, collision coverage, liability, uninsured/underinsured motorist coverage, medical payments coverage and more.