The Basics of Business Insurance

The Basics of Business Insurance

The purpose of small business insurance is to limit liability and to hedge against the risks of owning a business. The risk of physical damage to property and the risk that someone could be hurt on the business’s premises are always present.

A business owner’s policy (BOP) is one of the most popular types of insurance. This policy bundles basic coverages, liability and property, into one package. A business owner can also add on other coverages such as errors and omissions insurance or business continuation coverage.


Liability coverage protects business owners if anything happens to a customer. For example, if someone falls and is injured on the business property, this type of insurance will help pay for medical bills. If one of the employees does something that negatively affects a customer, this insurance could pay for the distress that is caused. The liability coverage component of business insurance limits the possibility of having to pay out a large settlement during a lawsuit.


Property insurance is another type of coverage that may be beneficial to business owners. This type of coverage provides assistance with some types of damage that occur on the property. If the building is damaged in a fire or during a storm, this type of insurance kicks in and helps repair the damage. This is an essential type of coverage to have, especially if a business owner is buying a piece of property with a commercial mortgage.

Home-Based Business Insurance

Contrary to popular belief, homeowners’ insurance policies do not generally cover home-based business losses. Depending on risks to the business, an owner may add riders to his/her homeowners’ policy to cover normal business risks such as property damage. However, homeowners’ policies only go so far in covering home-based businesses and the owner may need to purchase additional policies to cover other risks, such as general and professional liability.

Required Insurance

Certain types of insurance may be required for business owners. For example, a business owner must have worker’s compensation insurance if he/she has employees. If there are vehicles being used for the business, the state of South Dakota requires the business owner to purchase auto insurance.

If you have questions about a business owner’s insurance policy, please call American Trust Insurance and talk with Gary Rogers, Rick Long or Beth Wahl.


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