As an individual, you no doubt have certain types of insurance to protect you against possible harms. This includes homeowners and car insurance. If you are thinking of starting a business, or if you’ve started one already, then you also need insurance to protect it. While business and personal insurance serve the same overall function, they are not exactly the same. There are some differences that you need to understand as you shop for coverage and figure out what protection you need for your business. Here is a quick guide to go over the main differences between the two types of insurance.
Entity Named on the Policy
When you purchase personal insurance, you, or possibly you and family members, are named on the policy. However, even if you own a small business and you are the only employee, you cannot do that with business insurance. You must have your business named on the policy. Otherwise, you may not be protected when something bad happens. The party named on the policy is who is responsible for making payments, and is also who will be getting any compensation that is provided under the coverage. It is very important who or what is named, so make sure it is correct.
Category of Property Covered
With a homeowners policy, you are usually covered by damages to the property from most natural disasters, crime, and mishaps. It might also cover you if someone is injured or worse on your home property. With a commercial property policy, you are covered on the premises where you conduct your business, plus any other owned assets. This can include equipment, tools, computers, inventory, and furniture, among other things.
If you are running your business from home, you may not be covered by your personal policy. For instance, inventory and equipment present more of a risk, and therefore should have additional coverage. Never assume that you are protected if you do not have commercial property insurance.
However, you may not have to have property insurance. If your business doesn’t involve anyone coming to your place of business, and you don’t have inventory, you are probably fine. Think of medical professionals who do home visits, for example. Always check with your insurance provider, and ask them to check your best options. Never leave your business unprotected.
Limits of Coverage
For the most part, a business carries more risk for an insurance provider than an individual. They are also harder to deal with. This is because when it comes to individual insurance, there is less variance involved when it comes to coverage. Most individuals have similar homes, similar cars, and similar health needs. Therefore, the policies offered for personal insurance are very similar with a little variance depending on specific sutionats.
Businesses, however, are much more complicated in their policy needs. Properties can be different, and are located in disparate locations. What is on the premises of each business and how dangerous those items might be can vary wildly as well.
Businesses can have heavy equipment, many visitors, and any number of possible hazards on site, making them much riskier than individuals. This means that they have higher liability limits, and higher premiums as well. Do not expect to pay a similar or the same amount for your business policy as you do for your business one.
Commercial Auto and Personal Auto Coverage
Commercial automobile coverage tends to be more expensive than personal auto coverage. There are several reasons for this. For one, certain types of commercial vehicles have the potential to cause significantly more damage than a regular passenger car. Semi trucks and heavy equipment haulers can knock down walls, crush other cars, and be more likely to cause serious injury and death.
With your personal automobile policy, you only have to be concerned about your own driving history. You may have even gotten discounts over the years because of your safe driving record. However, if you have employees and other drivers on your staff, you will need to take their records into consideration when purchasing insurance. Not only that, but commercial vehicles tend to be on the road more than commuter vehicles, which means there is more chance of an accident. You can expect to pay more
Most personal policies do not include coverage against getting sued, since that is a very small risk for most people. However, for a business, a lawsuit could be an absolute death knell if it does not have protection. Without coverage, legal fees, defense costs, and damages would all have to come out of business assets. Itf those are not enough to cover it, then it could come out of your personal assets.
General liability coverage is essential for any business. You could get sued for any number of reasons, but general liability will protect you from most of them. For example, if someone gets injured on your property and thinks that you were negligent, you can be covered. If another business feels that your business has slandered their reputation in some way, you can be covered. You can also get covered if you are the victim of a cyber attack and data breach, and your clients bring a legal action against you.
Professional liability is also not a concern for individuals. If you give a friend bad financial advice, you might feel bad, but you are not in any legal peril. However, if you are a financial planner and provide poor advice, your client may try to claim that you were at fault in some way for any losses they suffer. This coverage applies to most service businesses, since mistakes and miscalculations have the potential of harming others financially.
As you can see, personal and business insurance are very different from each other. If you are looking to buy business insurance, do not assume you are protected by your personal policy, and do not assume you will be paying a similar amount. Make sure that your insurance provider knows exactly what you need so that you can be properly protected against anything that might happen.