Businesses have insurance to mitigate various types of risks such as from a fire, robbery, employee accident, or litigation that may arise. Not having insurance and more importantly the right type of insurance may not only jeopardize your business but also your personal assets. It is important to note that most states require businesses to mandatorily have certain types of insurance.
For instance, most states will at a minimum require the employer to have workers compensation, disability insurance, etc. Additionally, if you are going to rent your premises, the landlord may require you to have certain insurance as part of the lease. Generally, insurances can be segregated into two main categories: commercial insurance, which is generally not mandated by law, and employer insurance, which is generally mandated by federal and / or state agencies.
The following types of commercial insurances are not required by law; however, it may be a good idea to obtain these insurances in case of unforeseen circumstances depending on the nature of your business. Many small business owners are under the impression that if you conduct your business either as a corporation or a limited liability company you may not require insurance. Generally, these types of entities do protect your personal assets, but without the right type of insurance and coverage you could put in jeopardy all of your business assets.
General liability - this type of insurance provides protection from injuries, accidents, etc.
Medical and dental insurance - this type of insurance for employees should be considered as it is a common benefit provided by most of the businesses.
Life insurance - once again, this type of insurance for employees should be considered as it is a common benefit provided by most of the businesses.
Commercial property - this type of insurance protects your property against potential loss from various unforeseen circumstances such as a fire, theft, loss of income, business interruption, etc.
Product liability - if you are making or selling a product and if the product is defective, this type of insurance will provide protection against the losses resulting from the defect.
Professional liability - if you are in a service business, this type of insurance will provide protection in case of negligence, malpractice or errors. Most states mandate that certain professional carry this type of insurance.
Workers compensation - every business in every state by law is required to have this type of insurance.
Disability - this type of insurance is not mandatory in all states. However, in NJ all businesses by law must have this type of insurance.
Unemployment - every business in every state requires employers to pay this type of tax, which can be considered as insurance. The type and rate of insurance the employer will pay varies by each state.