Guide to Commercial Insurance

Businesses face several risks in their daily operations. Some of these can be major, possibly resulting in bankruptcy. For instance, a fire incident in your business warehouse can cost you millions of dollars in inventory and equipment, as well as the expense of paying liability claims to injured employees.

In the US, theft, property damage, and workplace injury are among the many risks that can lead to serious financial losses. This reinforces the importance of insurance coverage, which can help you bounce back when such risks become reality. 

Commercial or business insurance offers ideal protection for your business because such plans are specifically designed for the risks that business environments present. Commercial insurance plans come in different forms, based on your business’s needs. Here, the experts being MoneyWizard walk you through the basics of commercial insurance. Our experts will ensure you have the right information before you begin shopping for business insurance. Click through to read more. 

What is Commercial or Business Insurance?

Commercial insurance, commonly referred to as business insurance, is a broad term for a class of insurance plans designed to protect businesses against certain risks that may occur during daily operations. Several types of insurance policies fall under this umbrella term, each tailored to cover a specific risk. Such risks include property damage or loss due to fire, flooding, theft, vandalism, liability, and risks related to employees or others injured on your business premises. 

Commercial insurance and personal insurance policies share many similarities, and you will likely encounter several common terms that mean the same thing in both contexts. For instance, “coverage” refers to the amount of liability covered by the policy. Coverage and exclusions are indicated in the first section of the policy document. While coverage refers to risks covered by the policy, exclusions indicate risks not covered by the insurance plan. 

A deductible is the amount you pay out of your own pocket before your insurance takes effect to settle the remainder of the claim. Another closely related term is coinsurance, which represents a fixed percentage that a business or person must pay against a claim after meeting the deductible. Notably, commercial insurance serves the same role as personal insurance, except it is aimed at businesses. 

The first step in obtaining commercial insurance is identifying the risks unique to your business. Risks may differ from one business to the next based on the environment in which the business operates. For instance, a cash-in-transit company is at higher risk for theft than fire. Meanwhile, a mining company faces the risk of mines collapsing and serious injuries or fatalities, among other occupational hazards, that could cost a fortune in liability claims.

After identifying the potential risks your business faces, the next step is to determine the amount of coverage needed. This is guided by the size or nature of your business, as well as regulatory or contractual obligations with your clients, vendors, and lenders. Conducting this type of assessment can be daunting, especially if you are new to it. However, you can procure the services of a licensed insurance broker to assist you. Better yet, the sages at MoneyWizard.co can help you with the assessment and provide quotes from leading insurers in your area. 

What Does Commercial or Business Insurance Cover?

Commercial insurance covers a vast range of risks that could befall a business during its day-to-day operations. This insurance plan is designed to protect the property, employer, and employees of a business. Basic coverage encompasses property damage, theft, injury caused to people, or property damage caused by your drivers, as covered in commercial auto insurance. This insurance plan also covers business interruptions, lawsuits, income loss, equipment damage, and employee compensation, among several other optional coverage plans. 

In most cases, a business may face several unique risks simultaneously, which a single policy cannot cover. As such, a business should seek multiple covers for full protection. After all, it would be futile to pay premiums for a worker’s compensation policy only to lose your business to fire or burglary. You can find a general policy that covers a wide range of common risks your business might face. A business should only take a separate commercial policy for unique risks, such as data breaches. 

Common Types of Commercial or Business Insurance Policies

Typically, insurers match each risk affecting a business with a corresponding insurance product that will protect the business. Business owners have a world of plans to consider, based on specific risks their business might face. Common business insurance policies include: 

1. Commercial General Liability

In its day-to-day operations, your business may provoke third parties, such as your competition or other persons not part of your company. This could lead to costly lawsuits that your business might not be able to afford from its operational accounts. Business liability insurance provides protection against such lawsuits, which are common in competitive business environments.

Commercial general liability covers legal fees and settlements if your business is found liable in the lawsuit. It is an umbrella term encompassing several policies, including errors and omissions insurance, employment practices liability insurance, directors’ and officers’ liability insurance, and business identity theft insurance, among many others. 

2. Commercial Property Insurance

Property insurance covers your business’s physical assets for risks such as fire, theft, and vandalism. This policy is particularly important if your business requires a physical location and assets, as is the case with manufacturing companies and stores. There are several types of commercial property insurance, based on the level and type of risk. 

Commercial property insurance covers business property—such as equipment, inventory, furniture, buildings, and signage—from the aforementioned risks. Normally, this insurance does not cover business property in the event of natural disasters, such as floods or earthquakes, unless you buy a separate policy for such risks. 

High-value property, like excessively expensive equipment, also requires a separate plan, commonly referred to as a “rider” policy due to the enormous value involved. As with many other insurance plans, if there is a claim, the insurer only reimburses the policyholder for the actual value of the lost or damaged property or the replacement cost to repair the damage. 

3. Commercial Automobile Insurance

Commercial automobile insurance, also called commercial vehicle insurance, refers to insurance coverage designed specifically for business-owned vehicles. The policy protects the business against liability if the vehicle is involved in an accident and causes property damage or injury to others. Commercial automobile insurance settles the claim only up to the policy’s limit. 

Your personal auto insurer can decline to settle a claim that occurs if your personal vehicle is used to conduct business-related errands. This highlights the importance of commercial auto insurance. Consult your insurance agent if you want to change your vehicle’s usage from personal to commercial in order to avoid insurance loss in the event an insured risk occurs. 

4. Workers’ Compensation Policy

An employee has the right to sue an employer for compensation as a result of a workplace injury or work-related illnesses. To avoid such lawsuits, your business can get workers’ compensation insurance, which provides for workers who become injured or ill on the job with comprehensive benefits in exchange for their rights to sue the company. 

While policy benefits vary among states, the basics include provision of wages for lost work time and medical expense coverage. In some states, this is a legal obligation, requiring businesses to have a plan to compensate employees who are injured or exposed to illness at the workplace. If a worker dies from a work-related injury, benefits will be paid to the employee’s next-of-kin.

Other business insurance options include:

• Key employee insurance. Provides compensation to the business in the event an invaluable employee is disabled or dies on duty.
• Home-based business insurance. Covers home-based businesses for risks not covered by homeowners insurance.
• Product liability insurance. Covers compensation costs if clients are injured or their property is damaged by a product sold to them by your business. 
• Business interruption insurance. Covers income lost due to disaster-related closure and post-disaster rebuilding processes.
• Professional liability insurance. Covers professionals employed by the business against negligence and other claims that might be initiated by your clients.  

 How Much Does Commercial or Business Insurance Cost?

Several factors affect the cost of business insurance. These factors are responsible for the varying costs of different types of commercial insurance, and they all relate to the magnitude of risk involved. Average and median costs you see online only capture part of the story and, in most cases, do not reflect reality. 

The actual cost of commercial insurance depends on the nature and size of the business in question. Different size businesses that operate in the same industry may pay different premiums for the same type of commercial policy. The cost of business insurance is also determined by the type of policy a business needs, coverage amount, value of property and assets, location, and business longevity. These are all key factors in the cost of business insurance. 

It is important to familiarize yourself with how these factors influence the cost of insurance in order to score the best combination of cost and protection for the unique risks to which your business might be exposed. Fortunately, you can consult a specialist to help you compare quotes from different insurers. At MoneyWizard.co, simply give us your zip code and we can help you secure the best commercial insurance value for your business.

Takeaway

Business insurance helps protect you against losses when operating your business. With your zip code, you can easily get affordable quotes from the experts at MoneyWizard.co. This will give you peace of mind if a claim is ever made against you or if your equipment breaks down. 

Frequently Asked Questions (FAQ) About Commercial or Business Insurance

Here are three frequently asked questions about business insurance:

1. What Kind of Insurance Should a Small Business Owner Have?

As noted earlier, selecting the appropriate commercial insurance for your business is dependent on several internal and external factors. To begin, the type of risks your business faces should be your primary consideration, even above price. Ensure your business is covered against a risk that is likely to occur in your line of work. Be prudent as the risks a luxury cruise business faces differ greatly from those a grocery store faces, and vice versa. 

Even if businesses share some common risks despite their different nature, they might not always get the same top-to-bottom coverage. Therefore, you must consider the amount of coverage you seek. Perhaps you only want to protect your high-value equipment against theft, excluding other assets on your business’s premises. Based on the desired level of coverage, you can decide on the type of policy that is best for your business. 

2. Is Commercial or Business Insurance Required?

This depends on whether you want to dip into your pocket to restore your business if it goes down as a result of an insurable risk. Without business insurance, you are exposed to expensive damages, repairs, and legal claims filed against the business. Unless your business has ample resources to settle claims and pay for insurable damages, the experts behind MoneyWizard strongly recommend commercial insurance. You don’t need to insure your business against every conceivable risk. Instead, simply get protection against those risks that are most likely to occur.

3. Who Needs Commercial Auto Insurance?

When you begin using your personal vehicle to perform daily business errands, it loses its personal auto insurance privileges. This is when you should switch to commercial auto insurance. This policy protects your business against liability if your business-owned vehicle accidentally damages property or injures people. To avoid liability in the event of an accident, a business that owns vehicles should get commercial auto insurance for its fleet.