Different Types of Insurance for Retail Businesses

All businesses require insurance, whether they are an established Fortune 500 company, a clothing retailer, or a consulting firm. Retail insurance helps protect all parties involved – tenants, property owners, and consumers – and can prove to be a lifesaver during uncertain times. What types of insurance do businesses need? The type of insurance a business needs varies according to industry, location, and operations. This article recommends the best type of insurance for a shop in New York City.

Why is insurance for retail businesses important?

Risks are inevitable when opening and operating a business. Fortunately, insurance is available to help offset the burdens associated with those risks. Some insurance policies are merely recommended, while others are required by law. It’s important to remember, though, that insurance provides protection and can give business owners peace of mind when facing unanticipated circumstances. 

Managing Risks 

Without a crystal ball to foretell the future, business owners must rely on retail insurance to manage risk. No one can predict when a fire might destroy a retail space, when an employee may be injured on the job, or when a customer might sue over a faulty product. Retail insurance can help business owners manage such risks and protect against the loss of income. Having the right policies in place shows employees and customers that a business takes managing risk seriously and communicates that it will provide the right protection, no matter what happens.

Protecting Assets

Insurance for a shop is critical to helping it recover from losses due to natural disasters such as floods, earthquakes, tornadoes, hurricanes, and fire. It can help business owners cover repairs to damaged property or expenses due to lost inventory. Coverage can also extend to human assets – or employees – who suffer work-related injuries or illnesses and can be used to pay for medical care, missed wages, and funeral benefits. Retail insurance can also help companies cover litigation costs related to the enforcement or defense of intellectual property, including patents, trademarks, and copyrights.

Legal Coverage 

Any business can be sued and left with legal fees to pay. One reason for investing in retail insurance is to help cover the costs associated with such lawsuits. One broken contract, one disgruntled employee, and it could be game over for a business. Even if it wins the suit, the business may have to cease operations to cover its legal defense. Rather than worry about what could happen in the event of a lawsuit, businesses can invest in retail insurance and focus on what matters most – running a successful operation.

Some Insurance Is Required by Law 

In many states, insurance for retail businesses is required by law. According to the Small Business Administration (SBA), businesses with employees are required to provide specific types of insurance, including workers’ compensation, unemployment, and disability, depending on the state where the business is located. Failure to carry legally required coverage can result in fines, civil or criminal penalties, exclusion from public contracts, or “cease and desist” orders – all of which could cost a business owner far more than the price of an insurance policy.

What types of insurance do businesses need?

There is no one-size-fits-all when it comes to retail insurance. Rather, insurance is categorized according to type of coverage, which enables businesses to pick and choose the policies that are most suitable for their operations. For example, many retailers in New York City do not need commercial auto insurance. Likewise, those that do not sell liquor do not need liquor liability insurance. Although this à la carte selection process may help businesses reduce costs, it can also be confusing for those who are looking to open their doors for the first time. Here is a snapshot of the most common types of insurance required of New York retailers.

Commercial Property Insurance

Commercial property insurance protects a retailer’s physical assets. For example, if a building is damaged by an explosion or fire, is destroyed by a storm or vandalism, or is plagued by maintenance issues such as busted pipes, commercial property insurance can provide financial protection against lost assets – including signage, inventory, furniture and equipment, computers, and point-of-sale (POS) systems, and more. Business owners should provide their insurance agent a list of all assets prior to purchasing a policy.

Business Income Coverage

Business income coverage helps protect retailers against lost income and expenses associated with business interruptions. Commonly, retailers rely on business income coverage in case of damage to their property or the interior of their store, such as from fire, wind, or theft. It offers business owners the time they need to repair damages while ensuring they have coverage for expenses.

Professional Liability Insurance

In some cases, businesses may face claims of negligence from clients or customers. To cover associated costs of lawsuits, retailers can opt to purchase professional liability insurance. This insurance is not always required for retailers; rather, it is specific to industries that may face lawsuits associated with errors or omissions; for example, lawsuits associated with incomplete work, undelivered services, work errors, or accusations of negligence.

Workers’ Compensation Insurance

For most businesses that have employees, workers’ compensation insurance is required. Workers’ compensation insurance provides wage and medical benefits to employees in case they are injured or become ill while at work. Coverage generally covers rehabilitation and death benefits for more severe circumstances.

In New York, there are very few instances when an employer is exempt from this requirement. In fact, “illegally uninsured employers could be charged with a misdemeanor or a felony. Fines range from $1,000 to $50,000, in addition to a penalty of $2,000 for every 10 days without coverage.”

How does workers' compensation insurance work?

Workers’ compensation takes effect once an individual is harmed or becomes sick from a work-related cause. The employee reports it, and the retailer then files a claim. The state’s Workers’ Compensation Board or agency processes the claim and provides necessary benefits and payment to the employee.

Commercial Auto Insurance

Businesses that use cars, trucks, or vans for operations may need to invest in commercial auto insurance, which can cover liability, physical damage, hired auto, medical payments, uninsured motorist, non-owned coverage, and more. Auto accidents are one of the most common unforeseen events that can impact a business, and the right coverage ensures that a business’s operations can continue smoothly.

Data Breach Insurance

In the age of technology, data breach insurance is another recommended policy. All companies that use a computer – essentially all companies that exist today – face risks associated with data breaches. Data breach insurance protects businesses from any costs that result from a data breach, including those associated with notifying impacted individuals, offering identity theft monitoring services, and creating a public relations campaign.

Consider A Business Owner's Policy

Business owners who are seeking a consolidated option should consider a business owner’s policy (BOP). This policy combines the business property and business liability insurance into one policy. In addition, retailers can request extra coverage, such as data breach insurance. 

How much does business insurance cost? 

With so many selections, the most common question asked by retailers is “How much does this all cost?” 

Business insurance costs can vary according to location, industry, type of business, prior claims, and more – thus impacting the rate a retailer is charged. For perspective, here is what Insureon reports as the median cost of insurance for retailers as of June 2022:

"Retailers pay a median premium of about $65 per month, or $790 per year, for a business owner’s policy… This policy combines general liability insurance with commercial property insurance, typically at a lower rate than if the policies were purchased separately. The cost of a BOP depends on business property value.

“Retail storeowners pay a median premium of less than $45 per month, or $500 per year, for general liability insurance. The cost of general liability insurance depends on a business’s associated risks.

“The median premium for workers’ compensation insurance is less than $90 per month or $1,070 per year for retail shops … The cost of this policy is determined by the number of employees and their occupational risk, among other factors.

“Pet supply stores, clothing stores, and other retail businesses pay a median premium of less than $65 per month, or $760 per year, for commercial umbrella insurance. The cost depends on the amount of coverage [a business decides to] buy.

“Small businesses pay a median premium of $140 per month, or $1,675 per year, for cyber liability insurance. The cost of this policy depends on how much sensitive information [a] store handles, and how many employees can access it.”

New York retailers should consult with a professional to better learn prospective rates for their business needs.

Getting the Right Coverage

Every business owner should invest in insurance coverage because of the safety and security it provides in uncertain times. Not only does it provide financial coverage, but it can also prevent a business from going under during times of duress. With the proper insurance, business owners can achieve peace of mind and focus their attention on what they do best – operating a productive, profitable, and personally rewarding business for years to come.