What is Business Insurance

Property insurance covers the building or buildings and contents of the business. Outdoor signs, crime coverage, property of others, glass coverage, etc., can be covered as well, depending on the needs of your business.
Liability coverage covers sums you could be obligated to pay due to bodily injury or property damage to others. If you do not own your building, your landlord normally would need to be added as an additional insured on the policy in order to protect her. Liability covers the premises and operations of the insured, as well as her products and completed operations.
Workman's compensation insurance protects your employees if they suffer job-related injuries. The policy pays the medical bills for the employee who is injured on the job. If there is time off from work due to that injury, the insurance pays disability income to the injured worker.
Key man insurance protects key individuals in a business. If you are operating with a business loan, your banker may require "key man" insurance (or life insurance) as a way for the bank to get its money back if you are incapacitated in some way. Sole proprietors generally don't carry key man insurance; however, a partnership may have key man insurance.

How much business insurance does one need?

Don't make the mistake of many start-up businesses or small business entrepreneurs by skimping on liability insurance. Besides shielding you from a costly judgment, your policy gives you access to legal representation -- your insurance company -- which will fight to resolve any lawsuit on your behalf. If you own a building and carry property insurance, carry enough to rebuild the physical structure and replace its contents.

You need not insure the total value of your land (the building may be destroyed, but the land will still be there). An appraisal can clear up any doubt about the value of the property. It's best to insure your property (building and contents) for 100 percent of its value, and, if necessary, reduce the expense of the insurance policy by requesting a higher-deductible.

Other types of insurance may be necessary or unique to your particular business. For instance, if you operate a desktop publishing business out of your own home, you may assume that your homeowner's insurance will cover any theft or destruction of computer equipment. Some homeowner's policies may, but others may set a limit on claims for computer equipment that is much less than you have invested. Check your policy or confer with your agent if you're unsure. A freelance writer who works from home may not need liability insurance separate from her homeowner's policy -- unless she has customers or clients visiting frequently.