If you’re a business owner, or you’re just about to get your big idea off the ground, and your question is; What Is Commercial Insurance? and whether or not you’re actually protected. Well, you’re in the right place.
Simply put, commercial insurance is the same as business insurance. It protects your company from risks like theft, injuries on the job, lawsuits, health care costs, cyberattacks, disasters and other unexpected events. It can help cover or at least offset some of the costs when bad things happen.
What is commercial insurance?
A small business takes a lot of time, energy, and money to run successfully. As a business owner, you want to protect that investment and grow your revenue.
Commercial insurance, also called business insurance, can shield your business from costly risks like injuries, theft, property damage, and lawsuits.
Small business owners can purchase different types of commercial insurance coverage, which compensate them for financial losses arising from a variety of situations.
Generally, commercial insurance protects a business from standard risks, or liabilities, including:
- Client lawsuits
- Property theft and damage
- Customer or employee injury
- Unexpected events
It won’t protect a business against everything, but business insurance can be a lifesaver in (potentially) expensive situations.
How does commercial insurance work?
Essentially, commercial insurance policies pay for financial losses suffered by your business.
Let’s say your IT business experiences a covered event – someone breaks into your office and steals several laptops.
You file a claim with your commercial insurance provider. They investigate the claim, assess the damage, and then offer you the funds to buy new laptops and replace the window that the burglar smashed.
Other claims might be a bit more complicated. A liability claim, for example, often involves a lawsuit against your business.
In these situations, a customer, client, or unrelated third party believes your business caused them financial damage and wants compensation from you.
If someone sues your business for an event covered by your policy, your insurance provider will likely connect you with an attorney to take charge of your legal defense. The attorney will either defend your case in court, or offer to settle with the plaintiff.
All of the costs associated with the lawsuit are paid by the insurance provider, up to your policy limits, after you’ve paid your deductible. This includes attorney’s fees, court costs, and any settlement or judgment amount.
What Does Commercial Insurance Cover?
Unlike the different kinds of insurance you can get just for yourself, commercial insurance includes employees, property and equipment. So your entire business is protected, not just you.
But commercial insurance is not a one-size-fits-all. Since there are so many different types of businesses, insurance comes in many shapes and sizes (not quite 31 flavors, but close). For example, the risks in running a local roller-skating rink are very different from a construction company doing $500 million in annual revenue.
Here’s a breakdown of the different kinds of commercial insurance you can get. You can mix-and-match these into a package to fit your specific industry and business size.
Types of Commercial Insurance
1: Commercial general liability protects your business in a general way (this is insurance, not rocket science, after all). Think of it as a base layer of protection. It covers things like bodily injury, property damage, legal and medical expenses. So if someone slips on the ice in front of your store, breaks their ankle and sues you, general liability can help cover these legal costs.
2: Commercial auto insurance covers any vehicles you use to operate your business. So if you’re in the cookie distribution business, you’re gonna need those trucks insured to keep the cookies rolling.
3: Property insurance can also be a great piece of your plan. It’s exactly what it sounds like, it protects your physical assets and property. This includes items like tools, inventory in your store, equipment and even furniture. So if one of your warehouses spontaneously combusts, and you lose all of those widgets you just spent six months producing, it’s more of a blip than a devastating blow.
4: Commercial health insurance is any kind of health insurance offered by a nongovernmental agency. Ever heard of PPOs and HMOs? (Preferred provider organization and health maintenance organization, if you must know.) These are the two most common forms of health insurance that businesses provide their employees. These kinds of medical plans can be beneficial for both the business and the employees. Employers can get discounted rates by bundling a corporate health insurance package and that discount can be passed down to their team.
5: Workers’ compensation protects you when one of your workers gets injured on the job. Like that time Bobby threw out his back at work while carrying heavy boxes then tripping on a banana peel. (Come on, Bobby, be careful!) Workers’ compensation kicks in and will cover medical costs or lost wages due to time off. It also protects you from getting sued by an employee after an on-the-job accident.
6: Cyber liability insurance can help offset the damage from data hacks and other cyber threats. Imagine if all your customers’ data, including financial information, was compromised. What would you do? Cyber liability insurance is a great way to fight against these new digital threats.
7: Crime insurance protects against the threat of forgery, fraud and theft, whether it’s from employees or nonemployees. So when someone smashes your storefront window at your jewelry store and makes off with a $5,000 necklace, there’s insurance for that.
8: Business interruption covers longer periods of time when you might not be able to make any money due to unexpected events (2020, anyone?). Business interruption insurance also protects against accidents. Like if a fire destroys one of your buildings and you lose revenue for a month or two.
9: Business Owners Policy (BOP) insurance is when agents or carriers bundle different kinds of commercial insurance into a package. What comes with this bonus bundle? Well, it depends on your business, but here are some common ones that are lumped together: general liability, property and crime insurance.
How Much Does Commercial Insurance Cost?
The cost of commercial insurance varies widely based on the coverage your business requires and the amount of risk associated with your work. When evaluating the cost of your commercial insurance policies, an insurance broker or agent will take into consideration the following factors:
- The type of business you run
- The number of years you’ve been in business
- Gross annual revenue
- The location of your business
- Whether you own commercial vehicles
- Whether you own commercial property
- The number of employees at the company
- Training procedures for employees
Do I Need Commercial Insurance?
Your business needs commercial insurance to protect against financial loss related to liability claims, crime, natural disasters, fire and other issues affecting business operations. Companies that don’t invest in commercial insurance policies need to pay out of pocket when a disaster damages their property or a claim of liability is made against the company, which can lead to financial ruin, especially for small businesses.
Some types of commercial insurance are required by law. Most states require any business with employees to provide workers compensation. You can look into the particular requirements in your own state. Under the Affordable Care Act (ACA), businesses with fifty or more full-time equivalent employees need to provide their staff with health insurance.