Just the Basics
There are a few types of insurance every business needs. You probably bought policies that covered those areas when you first opened your doors-but have you kept up with your business's changing needs? Let's take a look:

Business property coverage. This insures your office equipment, inventory, and the building you own or tenant improvements you've made to space you rent against a range of perils, from fire to windstorms and some water damage-roof leaks are usually covered; floods aren't.

How much coverage do you need? The simple answer: What would it cost to get your business afloat again in the event a fire burned everything you own to cinders? "Determine how much your property is worth. That's how much coverage you need," says Madelyn Flannagan, director of research and information for The Independent Insurance Agents of America.

Take note: This isn't a static number. You'll want to continually update your limits. "Many business owners neglect doing this," says Flannagan.

Liability. This is what covers lawsuits from accidents that cause bodily injury (a delivery person slips on your steps), accidents that cause property damage (you sell a defective lubricant that burns out a customer's car engine), and a grab-bag of miscellaneous claims (like libel, slander and false advertising). "Don't buy less than $1 million in liability coverage," says Flannagan.

Buy just liability and property protection, and that's a start. But there are many more kinds of coverage you need, some of which are even required, either by law or by insurers. Below, we've assembled a grab-bag of policies. You probably don't need them all. But we'll bet you need more than you have.

Disasters. Many natural disasters-earthquakes and floods, for instance-aren't covered under standard property insurance policies. Coverage is available, sometimes from government agencies, sometimes from private insurers, and costs vary wildly. Earthquake insurance in California is pricey; in Texas, it's very cheap. If disaster insurance is inexpensive for your area, that's probably because insurers know it will rarely be needed. "[But] business owners ought to think hard about buying it," says Jones. "I had one client whose business was in a 500-year flood plain [meaning the best scientific guess is that it would flood only once every 500 years], and he got flooded out last year." Ask your agent how much disaster insurance would cost you. If it's expensive, that's all the more reason to buy it-the proof you need it is that insurers label your area "high risk."

Umbrellas. What happens when a lawsuit someone files against you brings in a verdict that exceeds the limits of your liability protection? It's bad news for you, unless you have umbrella protection, which provides, usually affordably, for "super limits" on protection, says David Sterling, president and CEO of Sterling & Sterling, a Great Neck, New York, insurance brokerage firm. An umbrella kicks in only when the ceiling of the basic, underlying policy is reached; that's why it's cheap. The umbrella issuer is betting you'll never exceed your basic policy limits. Buy an umbrella policy, and you can dramatically extend your coverage for a small amount of cash. How much coverage do you need? That's your call, and your answer will hinge on the size of your business and the size of jury awards in your state. A local insurance agent should be able to guide you in picking an amount of coverage that will bring you peace of mind.

Employment Practices Insurance. "Ten years ago, this coverage was non-existent; now it's widely available," says Olmstead. And it's also widely needed. If an employee sues your company for sexual harassment, wrongful termination, job discrimination, or any of the other increasingly popular claims alleging failures in your employment practices, this coverage kicks in with money so you can mount a legal defense and, if necessary, pay a settlement or damages. "There should not be a business without this coverage. Get it," says Sterling. He pegs the typical cost for a business with less than 100 employees at about $5,000 per year.

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