Business insurance definition
/What is Business Insurance?
Business insurance is designed to reimburse an organization for certain specified losses. There are many types of business insurance, each one intended to address a different type of risk. The exact type of insurance purchased will depend on the nature of the business and the environment in which it operates. Typically, the managers of a business will first attempt to mitigate risks by making adjustments to how the firm is operated, before deciding which remaining risks need to be offset by purchasing business insurance. There are many types of business insurance, including the types noted below.
Boiler and Machinery Insurance
The boiler and machinery insurance policy was initially designed to provide coverage for boiler explosions, but has since expanded to include coverage against equipment breakdowns (depending on the exact coverage purchased). A key benefit is that the insurer provides safety inspections and loss prevention advice as part of its coverage. Because of these inspections, an insurance company can also suspend its coverage if a reviewer determines that covered equipment is in a dangerous condition.
Related AccountingTools Courses
Business Interruption Insurance
The business interruption insurance policy is designed to provide compensation to an organization if a designated disaster shuts down its operations for a period of time. This policy covers lost profits from business interruption, as well as the reimbursement of actual expenses incurred during the period when a business cannot conduct its normal operations. Though the probability of a major business interruption is usually low, this coverage may be critical when a claim does occur, and may keep a business from being forced into bankruptcy.
Commercial General Liability Insurance
Th commercial general liability policy’s purpose is to protect the insured entity from losses if the entity is held liable for causing injuries to others or damage to property owned by a third party. This insurance provides coverage for a number of possible events, such as claims arising from bodily injury, personal injury, and damage to property that is caused by the operations or products of a business. When a claim is made, the insurer defends the insured.
Directors and Officers Liability Insurance
The directors and officers liability policy covers claims made by third parties against directors and officers, alleging that the directors and officers have caused damages by violating their duty. This coverage is essential, since the personal assets of directors and officers can be pursued by aggrieved shareholders, vendors, customers, employees, government agencies, and other parties. With this insurance, directors and officers are covered for acting within the scope and capacity of their positions.
Property Insurance
The property insurance policy protects against the loss of physical assets. The cost ranges from minimal for a services business with few assets to a substantial sum for an asset-intensive manufacturing facility. If a business has used mortgages to acquire assets, the lien holders will require that property insurance be purchased in order to protect their interests in the assets. This is usually considered essential insurance, since it provides coverage of what may be the largest assets of a business.
Vehicle Insurance
The vehicle insurance policy covers a business for any third-party injury caused by its vehicles. It may also provide comprehensive auto insurance, which covers the cost of vehicle repairs or replacement if it is involved in an accident.