Businesses are exposed to many risks during business operations leading to huge financial losses and even closure. Risks are usually associated with employees’ illness, injury or death, property damage, litigation, and theft. In order to cover the financial damage caused by such risk factors, there are many types of corporate insurance.
Corporate or business insurance acts as a protective cover against unforeseen incidents causing huge financial losses. Compensation provided by the corporate insurance policy ensures that the business enterprise continues to function smoothly.
Here are some of the major types of corporate insurance that business owners should understand.
Types of Corporate Insurance
General Liability Insurance
General Liability Insurance is the basic among all types of corporate insurance. This type of insurance covers the financial cost of legal liability arising as a result of damage or loss caused to a third party by the business enterprise’s operations. The cost of defending against the lawsuit or compensation paid to the aggrieved party for bodily injury, property damage, libel, or slander is covered by general liability insurance.
Professional Liability Insurance
Professional Liability Insurance is one of the important types of corporate insurance for companies engaged in providing services to customers. This type of insurance protects the business against financial losses caused by lawsuits arising due to negligence or mistakes in rendering the services. It is also known as Errors and Omission insurance.
This kind of insurance is specific as per the profession. Doctors, lawyers, insurers, accounting firms, and financial institutions commonly opt for professional liability insurance.
Product Liability Insurance
Product Liability Insurance is one of the most important types of corporate insurance for companies that manufacture products for mass consumption. This type of insurance protects the business against financial losses caused by product liability claims in the event of the product causing injury or bodily harm to its consumers.
Even if a company adheres to strict manufacturing standards and quality control, there is still a risk that a defective product can harm consumers. Hence, it is better to be on the safe side by purchasing product liability insurance.
Property insurance policies help business owners in recovering the costs of damaged properties. Apart from covering the cost of repairing or replacing the business property, property policies also compensate for the loss of income due to business interruption and loss of computers, documents, or the company’s cash. Thus, property insurance is also ranked among the important types of corporate insurance.
Comprehensive coverage policies cover events leading to property damage such as fire, storm, vandalism, etc. On the other hand, Peril-specific policies provide compensation for specific peril-induced property damage.
The private vehicles belonging to the employees of a business enterprise must be insured. Personal vehicle insurance covers the employees in an accident or other damages.
Commercial Vehicle Insurance
Commercial vehicle insurance is mandatory for any vehicle which provides commercial service to a business enterprise. This type of corporate insurance provides financial compensation against damages caused to the driver or vehicle or third party due to accident, collision, fire, theft, and other mishaps.
Business Interruption Insurance
Business Interruption Insurance is one of the desirable types of corporate insurance for businesses operating out of physical locations such as retail shops. Events such as riots or natural calamities, or others can lead to disruption of business operations due to the inability of the workers or customers to reach the business location. This leads to a loss of revenue.
The purpose of business interruption insurance is to cover the losses suffered during the period of business interruption. Once the losses are covered, the business can start again.
Cover for Loss of Income
This type of corporate insurance helps the business pay the fixed costs during the period of business inactivity in the aftermath of a natural disaster, fire, or any other mishap.
Employee Insurance Policies
Employee insurance policies also come under the categories of various types of corporate insurance. Some of the common types of employee insurance policies have been listed here.
- Worker’s Compensation Insurance protects the employees against financial losses caused by work-related injury or illness. The policy pays the medical expenses, compensates for the loss of income if the employee misses work, covers ongoing therapy costs, and pays the funeral costs if the employee loses his/her life due to work-related injury or illness.
- Employee Health Insurance is a group health insurance that covers the employees’ medical expenses in the event of hospitalization. Each employee gets the same benefits and insured amount. The employer is eligible for tax deductions on the premium paid for employee health insurance.
- Personal Accident Insurance provides financial security to the employees in injuries caused by accidents. The policy covers the cost of treatment of the accident injuries, 50% of the sum insured in case of partial disability, 100% of the sum insured in case of a total loss of vital limbs, and the entire sum insured in the event of accidental death.
Data Breach Insurance
Data Breach Insurance is one of the new types of corporate insurance. This insurance covers the business if a data breach causes the loss of the personal information of its customers or sensitive business data. The policy covers the cost of notifying the affected parties and installing an advanced security system to protect the data.
Umbrella insurance increases the coverage limits of liability insurance policies. This type of corporate insurance becomes useful when a liability claim exceeds the liability insurance policy limit. The umbrella policy covers the balance amount.
Directors and Officers Insurance
Directors and Officers Insurance is one of the lesser-known types of corporate insurance but is highly useful for directors and officers of business enterprises. This type of insurance protects directors and officers against financial losses caused by lawsuits against them in the event of their decisions harming other entities, including their own employer companies.
There are so many types of corporate insurance, so it becomes difficult to select the correct type of policy. Business owners should thoroughly review the risk factors for their businesses with the help of professionals before selecting policies.