Are Businesses Required to Carry Insurance?

Business insurance, like many types of expenditures is one of those items which business owners typically do not like to pay. Sufficient insurance can be as critical to the success of your business as a good product or service. Without proper insurance you could lose all of the money, time and effort you put into your company. The types and amounts of coverage you purchase must be evaluated on a cost-benefit basis like any other commodity which you purchase. Usually, you will want to insure against risks which could have significant detrimental impact on your business. This normally would include such items as fire, storm damage, theft, general, and product liability.

Depending on the nature and size of your business it is often a good idea to self-insure for all or a portion of certain losses. Self insurance can be accomplished by not buying coverage for incidental risks or increasing the deductions on policies which you do buy. Often, raising the deductible can have a very favorable impact on policy premiums. The administrative cost to the insurance company to process small claims is quite high, consequently the rates typically go down substantially if they are relieved of this expense by insuring for losses in excess of a sizable deductible amount.

What Insurance Is Required in Louisiana?

All Louisiana employers are required to obtain both Unemployment Insurance and Worker’s Compensation Insurance. Beyond that, there is no mandatory insurance requirement, though you may want to consider carrying the following types of insurance:

1. General Liability Insurance: Every business, even if home-based, needs to have liability insurance. The policy provides both defense and damages if you, your employees or your products or services cause or are alleged to have caused Bodily Injury or Property Damage to a third party.
2. Property Insurance: If you own your building or have business personal property, including office equipment, computers, inventory or tools you should consider purchasing a policy that will protect you if you have a fire, vandalism, theft, smoke damage etc.
3. Professional Liability Insurance: This type of insurance is also known as “Errors and Omissions Insurance”. The policy provides defense and damages for failure to or improperly rendering professional services. Your general liability policy does not provide this protection, so it is important to understand the difference. Professional liability insurance is applicable for any professional firm including lawyers, accountants, consultants, notaries, real estate agents, insurance agents, hair salons, technology providers or any other business that provides personal services.
4. Directors and Officers Insurance: This type of insurance protects the directors and officers of a company against their actions that affect the profitability or operations of the company. If a director or officer of your company, as a direct result of their actions on the job, finds him or herself in a legal situation, this type of insurance can cover costs or damages lost as a result of a lawsuit. You may also want to consider a Business Owners policy that will protect you from losses due to business interruption (such as closure due to fire/flooding/hurricane) and may lower your insurance costs by bundling it together with liability and property loss coverage.
5. Employee Fidelity Bond. This type of insurance typically covers the risk of loss from theft by employees. If your business deals in large amounts of cash, negotiable securities, or similar types of assets, you may be well advised to consider this coverage. Certain industries are required to carry this insurance.

If you have questions about insuring your your business, please contact us to set up a meeting to discuss your exposure to risk. We can help you review the amount of coverage you may want to carry and help you understand the cost/benefit of each type of insurance to your business.

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