Do I need Business Insurance? (2024)

When starting a company, even when everything seems to be flowing as smoothly as possible, there are still many steps to follow and paperwork to be done. It is a slightly tedious process and must be well taken care of.

One of the most important aspects of taking care of a company, large or small, is taking out insurance. It is often a topic as confusing as it is extensive, so it is necessary to talk about whether it is required to take out commercial insurance.

Is it really necessary to have business insurance?

Business insurance is responsible for helping companies in critical moments of their business life. Therefore, we can approach the need to have one in two ways.

Is it mandatory?

The answer is basic: No. Having business insurance is a matter of choice. There are many types of insurance for companies and businesses, with different coverages and policies applicable to the conditions of each business.

The above answer may vary from state to state because states can make decisions independently in these matters, as in many others.

But, in general, it is not usually necessary to purchase business insurance to operate legally. Most of the time, it is up to the business owner or manager to decide.

Among the types of business insurance discussed below, two are particularly mandatory in several or most states. Both policies are intended for the safety of not the company but the workers.

Besides those, it is not mandatory to have business insurance. It would not represent any risk, sanction, or fine for the company should they decide not to have them.

To have or not to have this type of insurance?

Under the context of this question, by changing “mandatory” to “necessary,” the answer is different. Whether business insurance is necessary depends on the conditions and considerations of each owner.

The owner should know how necessary the acquisition of business insurance is for the care of their company and their interests. If they do not consider it necessary, they do not have to contract one.

Leaving aside the necessity and talking about recommendations, it is advisable to subscribe to business insurance to achieve greater economic stability and to be able to face adversities that are difficult to overcome on one’s own.

Even so, it is still up to the owner(s) to decide whether to take out insurance; only they know under what conditions it may or may not be worthwhile.

For example, for freelancers who only work with a simple computer in their home, it may not be as necessary as for those who have a business with valuable items and live in a very insecure area.

What types of insurance policies may be required?

The primary and mandatory business insurance in most states is Workers’ Compensation. In addition to having a business, the company comprises workers besides the owner.

When the owner is an independent and sole worker within their company, they have no legal obligation to pay workers’ compensation insurance. It is mandatory when they have at least one other worker besides themself.

Workers’ compensation insurance serves to help the worker cover expenses after suffering an injury or illness within the work schedule and scope of employment. Whether the expenses are fully or partially covered depends on the policy.

This compensation can also guarantee the worker two-thirds of their salary while they are off work due to potential illness or injury caused by their work.

What types of policies are required?

There are several types of business insurance policies that are very useful depending on the needs of each individual. When one of these insurances is very useful for a company because it can cover a situation that is likely to happen, it can be considered necessary insurance.

Liability insurance

Liability insurance is responsible for covering part or all of the expenses generated by an injury to a person caused within the company’s premises or outside it, but with an object or service sold by the company.

A customer visits a store, branch, or any place where the company works and suffers a medical injury in that place. Most of the time, the company must cover the expenses. Liability insurance helps with them.

The same happens when an object or service, due to a flaw in its manufacture or creation, causes bodily harm to its user or damage to its property.

Commercial income insurance

Commercial income insurance is one of the most requested types of insurance for any company. It is a policy used when the company is temporarily unable to continue working due to a specific situation.

During that time, the insurance covers various payroll expenses, services, and invoices corresponding to the business while its owners manage to organize all their inconveniences and start working normally again.

Commercial property insurance

This insurance policy is practically indispensable when you have a large physical structure, owned or rented, and valuable items within the space.

This insurance coverage is usually quite broad, depending on the policy, from the slightest damage to the structure and objects to the most serious cases.

Commercial property insurance can cover the business in cases of fire, theft, broken pipes, vandalism to a greater or lesser degree, and even some natural events.

The broader the policy coverage, the higher the annual or monthly premium. Even so, businesses with a high monetary value are almost indispensable.