There are many types of highly recommended business insurance policies for business owners, some of which are optional and some of which are required by law. Your business insurance requirements will depend on the type of business you run, as well as the state in which your business is registered, and whether or not you have employees.
If you have even one employee, you will most likely be required to obtain workers compensation business insurance. Workers compensation insurance covers your employees’ medical bills and a portion of their lost wages in the event of an on-the-job injury. Every state has a workers compensation system in place, and these systems can vary slightly. Workers compensation insurance benefits business owners as well. Generally, there will be a provision in the state workers compensation system that prohibits the employee from suing their employer for an injury incurred on the job. Some states allow employers to opt out of the workers compensation system if they carry their own private form of this insurance.
Another form of business insurance available to employers is unemployment insurance. Unemployment insurance protects your employees when they are fired from your business. Many times owners who are considered employees are required to pay this insurance for themselves as well. This is often seen as an unfair system, since these owners are rarely put in a position to collect unemployment benefits. Some states have remedied this problem by enabling owners to opt out of paying the premiums for themselves if they are a substantial owner of the business.
Other types of business insurance may be required depending on the state in which your business is registered, as well as the terms of your business lease. In a minority of states, disability insurance is required. Disability insurance provides your employees with partial wage benefits in the event that they become ill or injured outside of work. While state law does not usually require you to carry property and casualty insurance, your landlord may require it as part of your lease for the business premises. Property and casualty insurance protects the real property in which your business is situated, as well as the business itself.
While other forms of business insurance may not be required in your state, there are some forms of business insurance that are highly recommended. Property and casualty insurance is one of these, as well as is liability insurance. While some business structures allow you to limit your liability, this is not a replacement for insurance. Business entities such as LLC’s or corporations that allow business owners to limit their liability may only provide limits to personal liability and offer no such protection to the business. Failure to carry these types of business insurance policies can leave your business open to potential liabilities and unseen costs, and can cost you more in the long run.