Companies can protect their assets by purchasing business insurance policies. These insurance policies transfers the financial loss caused by the insured to the insurance company. The insurer will indemnify the business up to the amount stated in the policy. Some of these policies can also help companies with their legal defense while in litigation.
Key Person Insurance
A key person insurance policy protects the business from financial loss or collapse if the key person, or someone who is vital to the success of the company, becomes disabled or dies. The policy is generally a life insurance plan taken out on the key person. Several examples of a key person include small business owners, partners of a company and CEO’s.
If the key person dies or becomes disabled the policy benefit is given to the company. The money can be used to train another employee to fill the vacant position, reimburse the company for losses suffered until the position is filled and also to buy out the key person’s interest in the company.
Professional Indemnity
Professional indemnity insurance protects businesses from being sued due to mistakes, errors, bad advice and recommendations that result in loss or damages suffered by another party. These plans pay the award amount won by or settled with the offended party up to the policy’s coverage limit. There are several types of professional indemnity insurance policies for businesses to buy including errors and omissions, malpractice and professional liability.
Professionals and businesses that purchase this type of insurance policy include doctors, lawyers, financial advisors, web designers and accountants. In some areas, businesses cannot operate unless they have a type of professional indemnity insurance plan. For example, Colorado requires all physicians to maintain a minimum amount of medical malpractice insurance to practice medicine in the state.
Commercial Auto Insurance
Businesses can protect their vehicles and their company by purchasing a commercial auto insurance policy. Commercial auto policies pay for damages caused by or to vehicles that are used to conduct business. These policies also pay for medical expenses of injured parties. Unlike personal auto insurance policies which only cover the accident, commercial auto plans can cover judgment awards if the injured party brings a lawsuit against the company. This plan can also cover accidents involving vendors and independent contractors who are conducting business on the behalf of the policyholder.
About Business Insurance
All of these policies except Key Person insurance pay for the policy owner’s legal fees while they are fighting claims. This is another benefit as court costs can cost businesses tens of thousands of dollars. It is also important that businesses have enough coverage to pay award amounts. Any judgment that exceeds the policy coverage limit will be the responsibility of the business to pay out of pocket.
Sources:
Small Business Notes. Key Employee Insurance (accessed July 13, 2010).
Small Business Administration. Get Insurance (accessed July 13, 2010).
Business Link. Professional Indemnity Insurance (accessed July 13, 2010).
Insurance Information Institute. Do I Need Professional Liability Insurance (accessed July 13, 2010).
Entrepreneur. Cover Your Cars (accessed July 13, 2010).
Jarrod Howell - Jarrod Howell is a graduate of Thaddeus Stevens College. He has been a freelance writer for a couple of years with most of his articles ...
