As an attorney for service providers, I often get asked about insurance coverage. “Is insurance really required?” “Why do I need it?”, or “How do I know what type of business insurance I am going to need?” These are all valid questions you should be asking, and we’ll start with simple answers.
Question #1: “Is business insurance required in the State of Florida?”
The short answer is – it depends. If you have employees, the State of Florida requires you to carry Worker’s Compensation Insurance to protect your employees in case of illness or injury, and if your business owns vehicles, you are required to carry Commercial Auto Insurance in case of work vehicle accidents. But when it comes to other types of business insurance that protect your company from disasters or mistakes, they are not required.
However, and I cannot state this strongly enough, those other types of insurance are incredibly important for the protection of your business entity in the long term.
Question #2: “What is Business Insurance and why do I need it?”
Business insurance is essentially a contract between your business and the insurance company – in exchange for you paying them money (premiums), they will pay for certain types of losses you may suffer. Each contract, or policy, sets out in detailed language what losses they will and will not cover.
Without business insurance, your business would be required to pay for its own losses. This could end up being hundreds and thousands of dollars for damages from a catastrophic natural disaster or it could be paying for your defense and damages related to legal claims brought on against you and/or your business.
Needless to say, a large amount of losses could ruin your business. Business insurance is a way you can pay smaller amounts each month (or year) in order to save yourself from having to pay larger losses if something bad happens.
Question #3: “How do I know what type of Business Insurance I am going to need?”
There are many types of business insurance available, and depending on what your business does and the types of services it sells, you may need specific types of policies. It is important to speak to an experienced business insurance agent for them to assist you in developing a risk management program, but it is equally important to know going into the conversation what your options are.
Here’s some basic information to help you get started on your research:
COMMERCIAL GENERAL LIABILITY (CGL)
Commercial general liability insurance policies cover bodily injury, personal injury, and property damage that is caused by a business’s operations or occurs on a business’s premises.
Commercial property insurance covers loss or damage to property that is owned by the business. It could include coverage for equipment, furniture, inventory, and sometimes real property.
AUTOMOBILE (OWNED AND NON-OWNED)
Commercial automobile insurance covers damage caused by auto accidents. Some policies only cover vehicles that are owned by the business. Other policies can cover “non-owned” vehicles – vehicles that may be owned by employees but are used for business purposes.
This is insurance provided to employees and is required by the government for most businesses. The insurance covers employees who are injured while on the job.
EMPLOYMENT PRACTICES LIABILITY (EPLI)
Covers claims of employees against their employer for negligence, discrimination, wrongful termination, harassment, etc.
Cyber security insurance covers losses resulting from a data breach.
Professional liability insurance protects professionals from claims of negligence. It is also known as “errors and omissions” insurance.
Business interruption insurance can also be referred to as “business loss” insurance. These types of policies pay for income that is lost due to an event of casualty. The events are defined in each policy, but they generally cover fire, storm, natural disasters, acts of government, etc.
Umbrella insurance is the type of policy that comes into play when an incident exceeds the limits of your other insurance policies. These are designed to cover damages that are above and beyond your other policy limits.
Last Important Note:
Shop around! Each policy is different. Each insurance company is different. Be careful to read and understand what exactly is included in each policy when they are presented to you. One insurance company may include a type of claim while another one excludes it. Be diligent and have patience when selecting your insurance policies (and the company). It’s not a fun process but your decisions could have big implications should you ever need to file a claim against them.