When it comes to business insurance policies, there are basically two categories:
- Those that cover a business’s property.
- Those that cover a business’s liability.
Both are important for small-business owners seeking to protect their assets.
What’s the difference between these two? Take a look.
Property Insurance Covers Physical Items
Commercial Property Insurance is fairly straightforward. You have physical property – tools or equipment you count on to do your job, items that are valuable, or objects you just like having around. When this property is damaged or stolen, Property Insurance is designed to help you repair or replace it so you can get quickly get back to work.
In your personal life, you may have experience with this kind of coverage. Homeowner’s insurance and personal auto insurance help you pay for damage to your home or car, respectively. Business property policies are similar. They can cover physical items your business owns, including…
- Computer equipment.
- Office building or office space.
- Supplies and inventory.
For example, if a fire breaks out in your server room and destroys thousands of dollars of equipment, you’d make a claim on your Property Insurance policy and it would likely provide funds to replace the damaged servers and repair the fire damage. If a burglar breaks in and steals computer monitors, your property policy could be used to repair the busted window and buy replacement monitors.
Simply put, Property Insurance is meant to directly protect the material assets that belong to your business.
Technology Liability Insurance Covers Financial Consequences
Liability insurance is a little harder to explain and broader in scope than Property Insurance. If it were briefly summed up, it could be described like this: liability insurance is designed to cover you for the financial consequences of your actions (or lack of action).
Most often, in business, these consequences take the form of monetary damages.
For example, you fail to deliver a functioning mobile app to a client. Since you breached the contract in which you promised an app, the client claims you’re liable for compensating them. If you have liability insurance, it may help pay for these monetary damages, preventing you from having to sell off business assets or dipping into your personal savings.
Liability can come in many forms, though, and there are different insurance policies that an IT business will need in order to cover all its liability exposures. Common forms of liability are…
- Premises Liability. When you do business in a location, you’re responsible for providing a reasonably safe area for visitors to that location. If someone is injured on your premises, you can be held liable for their medical costs. This is addressed by General Liability Insurance.
- Personal and Advertising Injury Liability. If you manage to harm someone’s reputation with untruthful comments or accidentally infringe on someone’s copyright, you can be liable for compensating them. This is usually addressed by General Liability Insurance.
- Professional Liability. As a professional in your field, you have a duty to provide a standard of service and care to your clients. Failure to do so, you can be liable to them. This is addressed by aptly named Professional Liability Insurance.
- Cyber Liability. If you store sensitive personal information about your customers or clients and that info is stolen in a data breach, you can be liable to those whose information was stolen for not providing adequate cybersecurity. This is addressed by Cyber Liability Insurance.
- Employer Liability. As an employer, you’re responsible for providing a safe work space for your employees. This is addressed by Workers’ Compensation Insurance for physical injuries and EPLI for cases of alleged discrimination and harassment.
Sometimes a liability claim can be directly paid out by your insurance policy. Other times – when you don’t think you’re at fault, for instance – you might be sued in a claim. The good news is that most liability policies offer coverage for the costs of these lawsuits – as long as it’s over a covered event. They can help pay for: