5 Important Terms To Understand When Buying Business Insurance
- Errors and Omissions
- Workers Compensation
Insurance can be a complicated topic, so business owners will want to understand some key terms to know when shopping for business insurance. Knowing what these terms mean helps business owners choose the right amount of coverage for their needs. The following guide will give a general overview of these terms so business owners will understand what their policies entail.
The deductible is one of the key terms to know when shopping for business insurance. It is the amount of money a company must pay on their own before the insurance policy begins making payouts. Businesses are usually given a few options of how high they want their deductible to be. The cost of the deductible is most influenced by the amount of coverage the policy affords as well as how high the premium is. Businesses should strongly consider the state of their finances when determining how high a deductible they can manage. This can be determined by past budgets and how much money is currently kept in a savings account.
The premium is the amount a business pays regularly to remain insured. This is usually every month although some policies have other payment schedules. Generally speaking, the higher the premium on a policy, the lower the deductible and vice versa. Businesses should determine how much premium they can reasonably afford each month when shopping for a policy of any kind. It is also important to compare policies from different insurers to see if a better deal on premium costs can be had.
Liability can mean a broad variety of things when it comes to business insurance. In general, liability means a responsibility on the part of a business. It is one of the biggest reasons why businesses carry insurance. For example, customers who slip and fall at a place of business can sue for damages caused by negligence. Liability insurance protects businesses financially in such an occurrence. Upon purchasing a policy, policyholders will typically receive a certificate of liability insurance as proof of their coverage. This document will outline the basic policy information and coverage.
Errors and Omissions
Errors and omissions, commonly shortened to “E & O,” is a type of insurance that covers businesses if damages are sought for mistakes. E & O coverage is especially common in certain service industries such as law, accounting, insurance, investing and engineering, among others. The malpractice insurance taken out by doctors, dentists and other medical professionals is a type of E & O coverage. According to Investopedia, E & O covers court costs as well, which pays for a business’s legal fees if they are taken to court by a client, even if they win.
Workers compensation is a source of confusion for many business owners, and with good reason. Unlike most other types of insurance, employers are legally mandated to carry workers compensation insurance if they have employees. Exact rules and coverage requirements vary from state to state. This type of insurance covers businesses when employees are injured or fall ill on the job. Businesses should take care to ensure that both state policy and company procedures are outlined in the company handbook or clearly hung on the walls. Carrying workers compensation insurance also legitimizes business operations and makes other companies more likely to want to work with a business that is properly covered.
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Business insurance is often quite different from the types of insurance private individuals obtain. Although there is some overlap, such as with property and vehicle insurance for commercial purposes, many types will be completely alien. Entrepreneurs should thoroughly understand these and other key terms to know when shopping for business insurance.