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Mandatory Insurance for your Business

By Compuquotes Team on May 12th, 2008

Business Insurance

If you're already a business owner you probably know that there are several types of business insurance. Some are considered essential, and some are simply nice to have, but not absolutely necessary. There are also some forms of business insurance that are required by law. If you're considering starting up your own business, this is essential information to help you decide which types of insurance you need.

Required by Law

Mandatory business insurance includes workers' compensation, disability coverage (depending on where you live), and business vehicle cover.

Workers' compensation: This insurance covers employees who are injured at work, or suffer illnesses that are caused by their working environment. Workers agree to give up their right to litigation in exchange for coverage, so this insurance protects the business owner as well as the workers. Note that workers' compensation isn't mandatory in all states: check with your insurance agent to make sure you get this cover if you need it.

Disability coverage: This type of business insurance is required by law in California, Hawaii, Rhode Island, the Commonwealth of Puerto Rico, New York, and New Jersey. Disability insurance provides cover for disabilities that occur as a result of non-occupational injuries. Requirements may vary by state, so talk with your insurance agent before buying this policy.

Business vehicle cover: If your business owns one or more vehicles (that is, the vehicle is registered under the name of the business), they must be insured with a business vehicle policy rather than with your personal automobile coverage.

May Be Required, but not by Law

Some types of business insurance aren't required by law, but might be required by the people you do business with. Depending on the type of business you operate, trying to obtain new clients may be problematic if you're operating without certain types of insurance.

Property Insurance: These policies protect your buildings and their contents, including equipment, stock, and other assets. This isn't required by law, but if you rent equipment, the rental company might require that you have property insurance to at least cover the equipment you've rented.

General Commercial Liability: This cover protects your business if a third party brings a lawsuit against you, and includes any accidents that occur on your premises, as well as injury or illness caused by your products. Depending on the business you operate, your clients or suppliers might require you maintain this type of insurance.

Umbrella Liability: As the name suggests, this provides you with liability cover over that supplied by general liability, workers' compensation, and automobile cover.

Employee Health or Life Cover: If you employee unionized workers, you may find that you must provide your employees with certain benefits as stipulated in union contracts. At the least, these benefits will most likely include health insurance of some kind. You may also find that you must provide certain employee benefits as a condition of doing business with government agencies. More importantly, depending on the size of your business and the state where you operate, health cover may actually be required by law.

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