What is business insurance and what is its importance?

Question

What will be an ideal response?

Answer 1

Business insurance describes the use of life and disability insurance to solve financial issues of businesses and business owners. It consists of (1) protection of owner or dependents against loss from premature death, disability, or medical expenses, (2) provision for the continuation of a business following the death of an owner, (3) economic loss to a business when a key employee dies, (4) disposition of a business owner's interest upon the death or separation from the business, (5) attraction and retention of valuable employees, and (6) rewarding faithful employees. Also, business continuation life insurance is used in closely held corporations to provide cash on the death of an owner. The cash can be used to retire the interest of a partner or, in case of death, to repurchase the stock of a closely held corporation.
A variation of this type of insurance, called key person insurance, insures the life (or lives) of important employees. Key person insurance is used more often in small firms than in large ones, for a given individual can be more important to the well-being of a smaller company.
A Corporate Owned Life Insurance (COLI) is one that the company purchases for vital employees and is also the primary beneficiary. This is useful for the small business which has key employees with specific talents or experience that would be hard to replace. One survey by New York Life indicated that 68% of Fortune 100 companies use COLI programs.
Insurers issue fidelity and surety bonds to guarantee that employees and others with whom the company transacts business are honest and will fulfill their contractual obligations. Fidelity bonds are purchased for employees occupying positions that involve the handling of company funds. Surety bonds provide protection against the failure of a contractor to fulfill contractual obligations. Problems with bonding restrict the growth of many small contractors.