The business insurance needed for a corporation isn't much different than you need for a small business, but it is more comprehensive because corporations incur a different level of risk. Incorporating a business means you will be developing a board of officers and each of them is going to have to be insured for different types of liability as well as collectively for their actions as a board.
Additionally, many corporations are formed from an established business, and the same basic types of insurance are still needed.
General Liability Business Insurance
General liability is the primary insurance all businesses need to have. This insurance covers everything from accidents to product liability. When you start your corporation, you will be using this type of insurance. If you're transitioning from an established business you probably already have this policy.
Errors and Omission Insurance
This insurance is sometimes referred to as malpractice insurance for the business world. Errors and omission insurance covers your company from claims of negligence or unsatisfactory work. The policy can include legal fees and advice. This type of insurance is critical if your corporation is based in the financial services or the legal field.
Worker's Compensation Insurance
The state of California requires workers compensation insurance. The coverage isn't different than what is required by law for non-incorporated businesses. You need this insurance, without it you will be fined and could be exposed to the possibility of substantial claims.
Director's and Officer's Insurance
You'll need this insurance for your management team. It covers any claims made against your top management as a result of their decisions and leadership. This insurance is often required by potential board members or investors.
If you have a website and you are collecting any type of information off of the web, even something as innocuous as emails, you can be held liable if you lose that information to hackers. This is a relatively new type of insurance, and many companies disregard it, but if you have been paying attention to the news, you know computer security breaches are on the rise. If your company is a victim, you want to be prepared to pay for services such as credit monitoring and ID protection for your affected customers.
Employment Practices Liability Insurance
Frequently referred to at EPL or EPLI, this insurance covers employers against allegations from employees. These could include discrimination, wrongful termination, harassment, and other employee issues. It’s important to ensure that this policy also provides defense costs for wage and hour allegations. While this insurance type is very common with large corporations who are ready to deal with any employee lawsuit, small businesses are often much more vulnerable to the employee claims that make this insurance necessary. This is usually because small businesses don’t have detailed employee handbooks that explain company policy and expectations, which leaves much more of a risky grey area.
Many business owners make the mistake of thinking they don't need all of this insurance, believing they will be covered by their general liability business insurance for most of the claims. Today's business insurance is specific about what it will include, not one insurance type will cover a business for every type of claim. This is why it's necessary to have a complete suite of insurance protection.
Culture Insurance is a premier insurance brokerage for the San Diego area. If you are considering establishing a corporation, we encourage you to contact us for further information.