Business Insurance by Dan Ramsey and Judy Ramse

Business insurance is big business! There are many types of risks in business, and for every one there is at least one type of policy. There are policies that protect business owners against loss from fire, theft, natural disasters, customer injury, employee theft, errors and omissions, and many other acts that can injure or destroy a small business.

Following is a short list of the primary types of business insurance policies available to small businesses:

    Property insurance pays if specified business property (building, fixtures, inventory) is damaged.

    Personal injury insurance covers costs of an injury to people or damage to personal property while on your business premises.

    Business income insurance pays if the business loses income due to an uncontrollable event.

    Physical damage insurance made to the landlord's property by a customer, employee, or other person.

    Employment practices insurance covers damages or settlements based on employment law.

    Key insurance protects against the loss (death or disability) of a key employee.

    Succession insurance pays the lost share of a partnership on the death of a partner.

    Errors and omissions insurance pays if a business principal makes a costly error.

    Cyber liability insurance pays on the loss of valuable data due to a computer security breach or catastrophic damage.

These are just a few of the more common insurance products available to small businesses. The most economical choice is to purchase a bundle of common business insurances in a package, sometimes called an umbrella policy. Rates are lower than for individual policies and can give you more protection than à la carte insurance.

How can you find adequate and cost-effective business insurance? Start with whatever company you use for your household and automotive insurance. It may or may not carry a business insurance line. If not, your agent probably can recommend a business insurance agent or company that can advise you. Your business success requires having an insurance adviser you can trust.

How much should you budget for business insurance? The answer depends on many factors—including where your business is located, the value of your business, the risks involved, and what inventory you carry. As a starting point, set aside about 1 to 2 percent of your estimated gross sales for annual insurance premiums on an umbrella policy for a typical small retail store. That's $1,000 to $2,000 annually for gross sales of $200,000.