Running a successful business is immensely challenging. You must find and retain great employees. You must outdo your competitors at marketing. Above all else, you must deliver outstanding products or services.

Running a successful business without purchasing insurance isn’t challenging. It is impossible. Although the state of South Dakota does not require employers to carry workers’ compensation insurance, your business can still be held liable if one of your employees is injured on the job. Considering that the average workers’ comp settlement exceeds $20,000, it’s easy to appreciate just how quickly a workplace accident can financially ruin a business.

And workplace accidents are only one threat to a business’s viability. A single thief or vandal may compromise your ability to do business. So too can a customer injury, loss of a key employee or auto accident. Most small businesses faced an insurable event in 2020.

So what does a savvy business owner do? They protect their most valuable asset – and, by extension, their livelihood – by purchasing a business owner’s policy.

What Is a Business Owner’s Policy?

A business owner’s policy (BOP) is the most common type of insurance purchased by  businesses. A BOP includes multiple types of coverages in accordance with the unique needs of the policyholder. For example, liquor liability insurance is indispensable for a restaurant for reasons that do not beg elaboration. Conversely, an educational facility can do well enough without it.

Understanding which types of coverages your BOP should include is as simple as speaking with a commercial insurance advisor. That said, the great majority of BOPs should include three key coverages: commercial property insurance, general liability insurance, and workers’ compensation insurance.

• Commercial property insurance doesn’t merely cover a business’s location in the event that it becomes damaged or destroyed by disasters such as fire or burst plumbing. It also covers that business’s essential items, such as its tools, materials and inventory. For example, if a fire destroys an auto dealership’s office, the dealership’s commercial property insurance would cover both its office and its floor models.

• General liability insurance covers a judgment or settlement that the business may have to pay as the result of a lawsuit filed against it. For example, if a grocery store is deemed liable for a patron’s medical bills, lost income and pain and suffering after said patron slips on a grape, that store’s general liability insurance would pay those expenses.

• Workers’ compensation insurance covers an employee’s medical expenses after they suffer a work-related injury, and also compensates the employee for wages they would have earned during their recovery period. Workers’ compensation also covers illnesses employees may have contracted during their period of employment, such as mesothelioma as the result of prolonged exposure to asbestos.

What Else Can a Business Owner’s Policy Include?

A BOP that solely comprises commercial property, general liability and workers’ compensation insurance is seldom sufficient to fully cover a business against all threats. Depending on the nature of the business, its BOP may also include one or more of the following.

• Commercial auto insurance covers damages caused by collisions, and is a requisite for any business which owns, leases or rents vehicles. It is just as essential for any business which requires its employees to operate their own vehicles as part of their job, such as a restaurant which delivers food.

• Business interruption insurance reimburses the business for income it may lose as the result of disastrous events such as fire, hail, theft and vandalism. Unlike commercial property insurance, which only covers the building and its contents, business interruption insurance covers the revenue the property would have generated had it not become damaged or destroyed.

• Professional liability insurance covers the business when an employee’s negligence or error results in measurable damages. Unlike general liability insurance, which typically covers property damage, physical injuries and advertising injuries, professional liability insurance covers expenses that directly result from lawsuits such as attorney’s fees and court costs.

• Key employee insurance covers financial losses a business may incur as the result of losing one of its indispensable employees. A small business owner may select this type of coverage so their heirs will receive sufficient funding to continue or close their operation in the event of their passing or incapacitation.

• Products-completed operations insurance covers liability claims resulting from the business’s product or services. For example, a contractor may purchase this type of coverage to protect their business in the event that defective materials cause extensive damage to one of their clients’ properties.

• Bailee’s customer insurance protects a business in the event that they damage, destroy or lose their customer’s property while it is in their possession. It can be of great value to auto garages, self-storage facilities, jewelers and other businesses that safekeep their customers’ property as part of their services.

The various types of coverages a BOP can include are too many to enumerate here. Every business is unique, and so too is the set of coverages which would fully protect it in a thoroughly unpredictable and litigious world.

If you would like to ensure that your business in the greater Sioux Falls, SD area is fully protected, then we welcome you to contact McKinneyOlson Insurance today. We have cared for local businesses since our foundation 1880, and our staff shares over six centuries’ worth of professional experience.