Five Key Insurance Programs for Small Businesses

1) Liability insurance: Liability insurance protects you if someone is injured at your business or because of your business. If someone slips and falls at your business location, liability insurance will pay if you are at fault. Similarly, if you make a product and that product injures someone, liability insurance will pay. The most important part of a liability policy is medical pay. This pays an injured person's medical bills regardless of fault. If someone is hurt on your property and it is not your fault, the medical bills will be paid anyway-thereby avoiding a lawsuit.

2) Auto insurance: Just like you insure your personal car, you should insure your business vehicle. Make sure you get the broadest insurance you can afford. If you have an employee who drives his or her personal car on a business trip, for example, that car may not be covered under the employee's personal auto insurance program. Make sure you have enough insurance to cover this and other scenarios relevant to your business.

Symbols represent the various types of coverage in a commercial auto policy. The symbol tells someone what types of cars are covered. Symbol 1 provides coverage for any auto for liability coverage, whereas symbol 7 only provides coverage for specifically described autos. Choose symbol 1 whenever possible.

3) Property insurance: Just as you would insure your home, you should insure your business property. Note that business coverage types vary. If you do not own your building, as is the case with most small businesses, then you need coverage for tenant improvements. This pays to replace the interior of the building and the work you did to turn the "shell" into your own office. The two most important coverage types in this category are important papers and business interruption. Important papers insurance covers damage to your papers and the cost to replace papers or recreate data. Business interruption insurance covers your income if you are forced to close your business due to a covered loss.

4) Life insurance: A key component of your business continuation plan, life insurance is necessary if you have a partner or partners. The beneficiary should be the business. This important coverage ensures that if one partner passes away, the business can continue.

5) Key person insurance: Many business owners do not know about or use this important insurance. Key person insurance pays your company if a key employee or partner dies or becomes disabled. If your top salesperson brings in 90 percent of your business, for example, this insurance would pay you that money until you can replace the salesperson. Make sure your policy covers only the important members of your team.

Your insurance needs may vary, but these five types of insurance are vital to your business. To prioritize, liability insurance and auto insurance will protect you if you are sued and should be your first purchases. Additionally, they are the least expensive in terms of unit prices for the protection they provide. Next, you should purchase property insurance. This will replace your property if it is damaged and could be extremely important in case of fire or theft. Life insurance is fourth on the list, followed by key person insurance, which you should have as your business grows.

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