Insurance for Day Traders

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Contributor, Benzinga
December 29, 2022

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Day traders need business insurance to protect them from losses from normal business operations. Many kinds of insurance cover these risks, such as general liability, professional liability and property coverage. Read on to learn more about the different types of insurance a day trader might need.

Insurance for Day Traders

Day traders must carefully consider and evaluate their business insurance needs to prevent financial losses in case of a claim. The Insurance Information Institute (III) gives these different types of policy options for business owners to consider.

1. Professional Liability (Errors and Omission Insurance)

When a company's services include giving advice, making suggestions, designing items, giving physical treatment or representing the needs of others, it opens itself up to being sued by customers, clients or patients who say the company was careless and hurt them. Most of the time, professional liability insurance or errors and omissions policies cover these risks. The insurer will pay any judgment for which the insured is found legally responsible up to the policy's maximum benefit. Legal fees are also covered, even when there has been no crime.

2. Directors and Officers Insurance

Directors and officers liability insurance cover those in control of a company or nonprofit organization if someone sues them for violating the rights of others while running the company or organization. The policy will cover any judgments for which the insured is legally liable up to the policy's limit. Even if no violation has occurred, the policy pays for legal representation.

3. Umbrella Insurance

An umbrella liability policy adds additional coverage to a company's various liability coverages. It prevents substantial losses from liability lawsuits. The umbrella policy may protect a corporation with employment practices liability insurance, directors and officers liability insurance or other liability insurance. The commercial umbrella policy also extends the coverage of other underlying policies, such as commercial auto or property insurance.

4. Workers Compensation Insurance

Workers' compensation insurance is required in every state except Texas if an employer has more than a certain number of workers, which varies from three to five depending on the state. Workers' compensation insurance, which is what most people call this type of coverage, pays for medical care and a portion of lost wages for an employee who gets hurt on the job — no matter who was at fault. When a worker dies from injuries incurred on the job, the insurance pays money to the worker's family. A very small business, like one run by one or two people out of their home, might not need workers' compensation insurance. The laws vary by state. Check with your state's department of insurance if in doubt.

5. General Liability

Any small business can face legal consequences because of negligence, defective products or workmanship or giving bad professional advice. Liability insurance pays the cost of damages to others for which you are legally responsible up to the policy limits, including legal fees and medical expenses of others injured by you or your business.

6. Property Insurance

Property insurance compensates businesses for fire and theft damages. Property insurance covers a company's personal property — its physical location and its furniture, supplies, raw materials, equipment, computers and other essentials. Property insurance may cover equipment failure, fire cleanup, water damage and other risks.

7. Commercial Auto

A commercial auto insurance policy protects vehicles owned by a business. The insurance compensates, up to the policy limits, any costs to third parties resulting from bodily injury or property damage for which the company is legally liable.

8. Key Employee Insurance

Life insurance or disability income insurance can compensate a business if a key employee dies or gets hurt and can't work. These coverages help to reduce some of the negative financial effects of losing a key employee.

9. Product Liability Insurance

The guarantee or warranty of a product is merely one component of product liability insurance. Consumers may be damaged by how a product is manufactured, advertised or used. Product liability insurance spares businesses from facing legal consequences if a product causes harm to an individual. 

10. Business Interruption Insurance

Business interruption insurance covers losses if a natural calamity forces your business to close. Business interruption insurance covers salary, utilities and loans.

If you must remain somewhere while your building is repaired, the coverage will cover relocating costs. In addition, business income insurance covers lost income, which is crucial.

Business interruption insurance does not cover water, glass, theft or vandalism. Endorsements can add this coverage. Say your business is closed for a while. An extended coverage endorsement can restore your lost revenue while you rebuild it.

11. Business Owners Policy (BOP)

One of the most common types of business insurance is called a business owner's policy (BOP). The BOP combines several types of coverage that most businesses need into one policy. For instance, the BOP package policy protects against damage to property, business interruption and liability. However, the BOP does not cover workers' compensation, professional liability, commercial auto, health and disability insurance.

12. Cyber Liability insurance

Given the prevalence of data breaches, cyber security is more important than ever for companies of all sizes. The company assumes full responsibility for any financial losses caused by cyber-attacks if it does not have data breach insurance.

The costs associated with a data breach for a business can be staggering. Data loss, theft, hacking, extortion, legal claims for defamation, privacy violations and legal defense costs are all covered by cyber liability insurance.

Why Do Day Traders Need Business Insurance?

The goal of day traders is to make money by buying and selling securities and stocks. But the stock market can be unstable. As a result, day traders risk losing money on the market and costing their clients money, which could make them financially responsible.

In addition, business insurance can shield companies from financial losses caused by fires, burglaries and accidents. 

How to Budget for Insurance Coverage

Suppose you want to know how to budget for commercial insurance. In that case, you should start by making a list of your ongoing operating costs, like your business phone line, internet and utility bills as well as your business insurance premium.

If you need help in developing a business budget, one option to consider is getting professional financial assistance from a certified public accountant (CPA) or bookkeeper. Some online companies also provide financial services for small businesses. 

CPAs have formal training in helping businesses manage financial affairs. A bookkeeper can also provide many of the same services but may not have a professional degree. 

Your organization will require a financial manager to manage these business tasks:

  • Payroll
  • Accounts receivable
  • Accounts payable
  • Bank reconciliation
  • Cash flow

Compare Commercial Insurance

Business insurance is essential to protect the financial assets of your business in case of a loss. You can start looking for the right commercial insurance by comparing the policies of the companies listed below.

Frequently Asked Questions


Why is insurance important for small businesses?


Small-business insurance helps business owners protect their businesses from possible losses they couldn’t pay for on their own, allowing companies to stay open when it might be too risky to do so otherwise.


What is small business insurance?


Small-business insurance protects business owners from losses that could happen in the normal course of doing business.

About Janet Hunt, Insurance Agent

Janet has been working in, and writing about, the insurance industry for over 20 years.