Business insurance is a means of managing risk in a business enterprise. It involves transference of risks to another party provided that this practice is adopted at a cost-effective rate.
When operating a business enterprise there are a number of potential risks that may impact negatively on the company’s finances, reputation and right to operate in the given industry hence illustrating the need to determine all potential risks that apply to the business and develop measures to manage these risks.
A recommended approach is transferring these risks to another party -an insurer – in a cost effective manner.
The types of business insurance
According to financial adviser such as Mauneel Desai, risks in a business exist in various forms. The risk may be related to the health of the employer or employees, it may be created by a staff member suing the employer or may develop as a result of a fire that would destroy the assets.
Each risk falls in a particular category and the insurance provided for each category varies.
Commercial property insurance
This insurance protects the business against any losses or damage on the business’ location or its assets. The loss or damage to the business’ property may be caused by a number of factors therefore one may adopt either an all-risk policies property insurance or a peril-specific one.
In this type of property insurance a wide range of factors that may cause damage to commercial property may be included in the policy therefore covering the business against any losses or damages on its property based on the listed factors.
This property insurance type focuses on a particular factor that may cause loss or damage to property.
For instance, the business may adopt insurance against losses or damages caused by fire therefore any damage or loss to commercial property that is not caused by fire would not be transferred to the insurer.
- This insurance protects the business from legal hassles based on negligence claims against the business or its employees.
- General liability insurance is involved with protecting the business from payments tied to damage of property, bodily injury and medical expenses among other losses incurred due to negligence of the business or its employees.
- Product liability insurance focuses on safety issues associated with the product that it has manufactured, distributed or retailed.
Life and disability insurance
This insurance protects the business against any losses or damage that may develop as a result of death or disability of an employee or major stakeholder.
Other insurance types
- There are numerous risks that a business may be exposed to therefore insurance types are numerous as well.
- Business interruption insurance protects the business from losses or damages because the business was unable to operate after an interruption occurred in the form of power failure or otherwise.
- Home-based businesses too can be protected against a number of risks. It should be noted that homeowner’s insurer’s policies do not cover losses for businesses that are based at home.
A primary requirement for every adult benefiting from business insurance or registering for this insurance is that one has to be a holder of a national insurance number.