June 12, 2024
|In Business Insurance
|By CJ
If you’re a new business owner and are just learning the ropes, you probably have a lot of questions.
After all, there is a lot to learn.
Chances are, one of those questions will be, “What is commercial insurance?”
Most people know how car or homeowners insurance works, but if you’re new to owning a business, you probably won’t know much about commercial insurance.
Commercial insurance is a broad term encompassing many insurance policies available to businesses. Keep reading for a breakdown of standard commercial insurance policies and the benefits of each.
What is Commercial Insurance?
Commercial insurance works similarly topersonal insurance.
Business insurance exists to protect your business from financial loss caused by specified events. Depending on the circ*mstances of the loss, different policies are available.
Overall, commercial insurance protects businesses from liabilities such as lawsuits from third parties, such as customers or those they entered a contractual relationship with, lawsuits from clients, injuries to employees or customers, and damage or theft of business property.
As technology advances, new types of insurance have come into play, such as cyber liability insurance, which protects businesses from liability when data breaches expose customer information.
Businesses with employees are usually required by state law to carry workers’ compensation insurance. Otherwise, choosing whether to purchase insurance is up to them.
The exception to this is contractual liability. When businesses enter contracts with other entities, such as landlords, they often commit to carrying commercial liability insurance.
What Commercial Insurance Looks Like
Commercial insurance policies are similar to personal policies in many ways. Both types of policies have similar language and coverage conditions.
Let’s look at some examples:
Policy Limits
Each policy and type of coverage will have a limit. This limits how much money the insurance policy will pay in the event of a loss.
There is usually a limit per claim and a limit per policy overall. For example, there could be a per-claim limit of $1 million and an aggregate policy limit of $2 million.
Most commercial liability insurance policies have a $1 million limit.
Deductibles
Some commercial liability insurance policies have a deductible, while others don’t. If you have a deductible, you must pay your deductible before insurance pays the rest of the claim.
Some insurance companies will pay the claim in full and allow you to reimburse them for your deductible if they are paying a third party.
Coverages/Exclusions
After the insuring agreement, the first section of your policy will tell you what the policy covers.
After your coverages, come the exclusions. The policy won’t pay for these things or conditions that exclude coverage. For example, all liability policies exclude coverage if you harm another party intentionally.
Types of Commercial Insurance
As we mentioned before, commercial insurance is a broad term. Technically, commercial insurance refers to insurance available to businesses.
In reality, there are a handful of specific commercial insurance policies that all businesses should have.
Sometimes, commercial insurance is used synonymously with general liability insurance, but for the sake of accuracy, let’s break commercial insurance down by some of its standard policies.
General Liability Insurance
Although sometimes used interchangeably with commercial insurance, general liability insurance is different.
General liability insurance has specific coverages and does not cover all potential losses. It covers you if someone is injured by or on your property because of your or your employee’s negligence.
It will also cover damage to others’ property that you cause. These policies also include coverage if you commit personal or advertising injury, which provides for defamation.
If a third party sues you for any of these reasons, your policy will pay for all legal and court fees incurred. The insurance company will pay the claim, defend you, or offer a settlement.
Property Insurance
Commercial property insurance policies are similar to personal property insurance policies.
You’ll need this coverage to protect your buildings and their contents from theft and physical damage. Natural disasters and fires can cause devastating financial loss.
Business property policies can also include additional coverages such as business interruption, loss of use, and business personal property.
Workers’ Compensation
Workers comp insuranceprovides coverage and benefits for your employees if they are injured on the job.
It will cover their medical expenses and help them with lost wages if they miss time from work because of their injury. In exchange for these benefits, your employees will lose the right to sue you.
Errors and Omissions
This coverage is essential for those in the tech industry but is common for professionals like lawyers and insurance agents.
Errors and omissions coverage protects you from lawsuits based on a mistake you made. We all make mistakes, and that’s why this coverage is important.
If your mistake affects your client, they might sue you. This coverage will cover the cost of the lawsuit.
Cyber Liability Insurance
This insurance protects you when a data breach affects you or your clients.
This newer type of insurance can help cover the cost of data breaches and the costs associated with recovering from them.
Buying Commercial Insurance
Now that you know the answer to the question, “What is commercial insurance?” it’s time to shop for a policy.
Your insurance agent will help explain the coverages necessary for your business and provide you with a quote.Contact ustoday to speak to an insurance expert in our office.
FAQs
What is commercial insurance, and why do businesses need it?
Commercial insurance provides financial protection to businesses against various risks, including property damage, liability claims, and business interruption. It’s essential for safeguarding business assets and mitigating financial losses.
What types of coverage are included in commercial insurance policies?
Commercial insurance policies may include coverage for property damage, general liability, professional liability, commercial auto, workers’ compensation, and business interruption, among others.
How does commercial insurance differ from personal insurance?
Commercial insurance is specifically designed to address businesses’ unique risks and needs, whereas personal insurance provides coverage for individuals and their assets.
Are businesses legally required to have commercial insurance?
The insurance requirements for businesses vary depending on the industry, location, and business size. While some types of insurance, such as workers’ compensation, may be legally required, others are typically recommended for adequate protection.
How do businesses determine the right amount of coverage for their needs?
Businesses should carefully assess their risks and liabilities to determine the appropriate types and levels of coverage needed. Consulting with an insurance agent or broker can help businesses tailor their coverage to suit their needs.
What factors affect the cost of commercial insurance premiums?
The cost of commercial insurance premiums depends on factors such as the type of business, its size, location, industry, claims history, coverage limits, and deductible amounts.
What steps should businesses take to file a commercial insurance claim?
In the event of an incident or claim, businesses should notify their insurance provider immediately and provide all relevant documentation and information to facilitate the claims process.
Can businesses customize their commercial insurance policies to fit their needs?
Yes, businesses can often customize their commercial insurance policies by adding endorsem*nts, increasing coverage limits, or adjusting deductible amounts to better align with their risk tolerance and budget.
How can businesses find the right commercial insurance provider?
Businesses should research insurance providers, compare quotes, and consider financial stability, customer service reputation, and industry expertise when selecting a commercial insurance provider.
