Would you rather buy business insurance or go without it?

Answer: Buying business insurance can prevent a huge financial loss to a business if one of its assets, such as inventory, is damaged or destroyed. You can limit your risk by buying general liability and property-loss coverage to protect yourself from costs incurred from the ownership and use of your vehicles, equipment, and other tangible property. But if you don’t want to pay for any coverage at all, it’s easiest just not to buy any assets in the first place!

Property insurance covers direct or indirect loss to the business’ tangible property. This includes equipment, furnishings, inventory, tools, and other valuable items that are important to your daily operations. When you buy a new computer for the office, it’s an addition to the company’s assets. That same computer is covered if it is stolen or damaged in a fire because you have chosen the correct types of coverage.

There are two basic categories of property-loss insurance:

The first thing to consider when buying business insurance is whether your policy needs to include both general liability and property-loss coverages or just one of them. These two types of policies protect different areas of your business from various forms of risk from outside sources including lawsuits resulting from bodily injury, property damage, and personal injury.

Insurance companies have a standard “business auto policy” that automatically includes both types of coverages, but it is possible to obtain only one type of coverage in a separate business insurance policy. The factors you need to consider when making this decision are:

• How much do your assets cost?
• What happens if they’re damaged or destroyed by fire, vandalism, or accident?
• Will the costs from these incidents place a substantial dent in your firm’s income, perhaps even forcing a shutdown?
• Do you need an attorney because someone sued your business for bodily injury or property damage?

As general liability and property-loss coverages provide different levels of protection, the insurance company will calculate a premium for each type based on how likely it is that you’ll file a claim against the policy. If your firm usually files small claims related to property damage and you can absorb these expenses out of your operating budget, your rates may be less if only property-loss coverage is purchased. On the other hand, if business owners or employees are frequently involved in accidents or you have valuable assets that might require extensive repairs or replacement, then general liability coverage would probably be best.