What Is Commercial Insurance?

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Commercial insurance is a type of insurance that helps businesses protect themselves against the financial consequences of unexpected events. Whether it's damage to a company's property, liability claims, or the loss of income due to a covered event, commercial insurance can provide the financial support businesses need to recover and continue operating. In this article, we will take a closer look at what commercial insurance is and the different types of coverage available to businesses.

How Does Commercial Insurance Work?

Commercial insurance provides businesses with financial protection against the risks they face in the course of their operations. When a company purchases a business insurance policy, they pay a premium to the insurance company in exchange for coverage against certain types of losses. This may include paying for the costs of repairing or replacing damaged property, covering legal fees and settlements, or providing income replacement in the event of a business interruption.

There are many different types of commercial insurance policies available, each of which provides coverage for specific types of risks.

For example, a commercial property insurance policy may cover the costs of repairing or replacing a business's buildings, equipment, and inventory in the event of a covered loss, such as a fire or natural disaster. A liability insurance policy, on the other hand, may cover the costs of legal fees and settlements if a business is sued for damages or injuries sustained by a third party.

Business owners will need to research the risks specific to their operations. For example, accountants and lawyers may need professional liability insurance, which protects against errors and omissions made while giving services. This may not be as important for an ecommerce store.

Overall, commercial insurance is an important tool for businesses to protect themselves against the financial consequences of unexpected events. It can provide peace of mind and help businesses focus on their core operations, rather than worrying about the potential risks of operating a business.

Common Types of Commercial Insurance

Common types of commercial insurance coverage include general liability, commercial property, workers’ compensation, professional liability and commercial auto. Business owners often buy BOPs, which bundle multiple types of coverage.

General Liability Insurance

General liability insurance provides coverage for businesses against claims of bodily injury, property damage, and personal and advertising injury. These types of claims can arise from a variety of situations, such as accidents that occur on a company's property or even defamation and libel.

One of the main advantages of general liability insurance is that it can help protect a business's financial stability in the event of a costly lawsuit. Without this type of insurance, a business may be at risk of losing significant amounts of money if it is found liable for damages.

Commercial Property

Commercial property insurance helps businesses protect their physical assets, such as buildings, equipment, and inventory, from damage or loss. This type of insurance is important for businesses that own their own property or lease space for their operations.

There are several types of commercial property insurance policies available, including coverage for fire, theft, and natural disasters. Some policies allow you to add business interruption coverage, which can help a company recover from losses sustained due to a covered event that disrupts its operations.

Workers Compensation

Workers compensation insurance provides financial protection for employees who are injured or become ill as a result of their job duties.

Workers’ compensation is required by law in most states and is designed to cover the costs of medical treatment and rehabilitation, lost wages, and other expenses related to a workplace injury or illness.

In some cases, an employee may also be eligible for permanent disability benefits if they are unable to return to work due to their injury or illness.

Workers compensation insurance is provided by an employer and covers all employees, regardless of who is at fault for the injury or illness. This means that an employee does not need to prove that the injury was caused by the employer's negligence in order to receive benefits. Instead, the employee simply needs to show that the injury or illness occurred while they were performing their job duties.

Errors and Emissions

Errors and omissions insurance, also known as professional liability insurance or E&O insurance, is a type of insurance that provides coverage for businesses and professionals against claims of errors, omissions, or negligent acts made in the course of providing professional services. This type of insurance is designed to protect professionals such as lawyers, accountants, consultants, and architects, as well as businesses that provide professional services, from the financial consequences of these types of claims.

Errors and omissions insurance can cover a wide range of situations, including mistakes made in the course of providing professional services, failure to deliver services as promised, and failure to meet professional standards. It can also cover legal defense costs in the event that a professional is sued for these types of errors or omissions.

Commercial Auto

Commercial auto insurance provides coverage for businesses that use vehicles for business use, such as transporting inventory or traveling to client locations. This type of insurance is designed to protect businesses against the financial consequences of accidents, theft, and other losses involving company-owned or leased vehicles. Your personal auto policy will not cover losses incurred while driving an insured vehicle for commercial use.

There are several types of commercial auto insurance policies available, including coverage for liability, physical damage, and medical payments.

  • Liability coverage helps protect a business from legal responsibility for damages or injuries sustained by others as a result of an accident involving a company vehicle.
  • Physical damage coverage (comprehensive and collision) helps cover the costs of repairing or replacing a company vehicle that is damaged in an accident with another car or a non-collision loss, such as fire, theft or vandalism.
  • Medical payments coverage helps cover the costs of medical treatment for individuals who are injured in an accident involving a company vehicle.

Business Owners Policy

A business owner's policy (BOP) is a type of insurance package that combines coverage for both property and liability in one policy. It is designed to provide small to medium-sized businesses with a comprehensive insurance solution that meets their specific needs.

A typical BOP includes coverage for buildings, equipment, and inventory, as well as liability coverage for claims of bodily injury, property damage, and personal and advertising injury. It may also include additional coverage options, such as business interruption insurance, which helps a business recover from losses sustained due to a covered event that disrupts its operations.

An advantage of a business owner's policy is that it provides a convenient and cost-effective way for businesses to obtain both property and liability coverage in one package.

BOPs are typically available to small to medium-sized businesses in a variety of industries, including retail, food service, general contracting and more.

Commercial Health

Employers can buy commercial health insurance for their employees, which provides coverage for medical treatment, hospital stays, prescription medications and more. Adding health insurance to your employee benefits package can be useful for attracting talented workers to your business.

Cyber Liability

Cyber liability insurance protects against the financial consequences of data breaches and cyber attacks. This can include coverage for legal fees, customer notification costs, credit monitoring services, and other expenses related to a cyber incident. Cyber liability insurance can also provide coverage for the costs of recovering from a cyber attack, such as the cost of hiring an IT firm to restore and repair a company's systems.

What Types of Commercial Insurance Are Required?

The types of commercial insurance coverage that are required vary depending on the specific needs of a business and the laws and regulations in the jurisdiction in which it operates. Some common types of commercial insurance coverage that may be required include:

  • Workers compensation insurance, which is required by law in most states and covers employee injuries or illnesses sustained while on the job
  • Commercial auto insurance, which is required by law for businesses that operate vehicles
  • General liability insurance, which is often required for contractors clients as a condition of doing business
  • Professional liability insurance, which may be required for certain types of professionals, such as lawyers or accountants

In addition to these types of insurance, businesses may also be required to carry other types of coverage depending on their specific operations and the risks they face. It is important for businesses to carefully review their insurance needs and ensure that they are compliant with all relevant laws and regulations.

Buy Coverage Specific to Your Business Needs

What Does Commercial Insurance Cover?

Coverage will vary based on the type of policies you purchase. Depending on the scope of coverage you purchase, your commercial policy may protect you from the following claims:

  • Property damage to a business's buildings, equipment, and inventory
  • Liability for claims of bodily injury, property damage, and personal and advertising injury
  • Business interruption, which covers losses sustained due to a covered event that disrupts business operations
  • Professional liability, which covers errors, omissions, or negligent acts made in the course of providing professional services
  • Vehicle damage or loss for company-owned or leased vehicles
  • Employee injuries or illnesses sustained while on the job
  • Cyber liability, which covers losses related to data breaches or cyber attacks
  • Product liability, which covers claims of injury or damage caused by a company's products
  • Directors and officers liability, which covers losses related to the actions of a company's directors and officers.

What Isn’t Covered By Commercial Insurance?

Each policy you buy will carry exclusions, which will not be covered. Commercial insurance coverage exclusions will vary per policy but will generally include:

  • Intentional acts or criminal activities
  • War, nuclear accidents, or terrorism
  • Caused by illegal activities
  • Failure to maintain proper maintenance or upkeep of property
  • Normal wear and tear of property
  • Failure to follow government regulations or laws
  • Failure to obtain proper permits or licenses

How Much Is Commercial Insurance?

The cost of commercial insurance can vary widely depending on a variety of factors, including the type of coverage needed, the size and nature of the business, and the specific risks the business faces. The majority of Next Insurance customers pay the following monthly rates:

  • General liability: $25-$45
  • Workers’ compensation: $25-$150
  • Professional liability: $25-$45
  • Commercial auto: $62.50-$250
  • Commercial property: $25-$45

How To Get Commercial Business Insurance Coverage

To get commercial business insurance coverage, you will need to follow these steps:

  1. Assess your business's insurance needs: Conduct a risk assessment to identify the specific risks your business faces and the types of coverage you need to protect against those risks.
  2. Shop around: Compare quotes from multiple commercial insurance companies to find the best coverage at the best price.
  3. Review policy terms and conditions: Carefully review the policy terms and conditions to ensure that you understand what is and is not covered under the policy.
  4. Purchase the policy: Once you have chosen the right policy for your business, you can purchase the coverage by paying the premium.
  5. Keep the policy up to date: Make sure to review and update your policy as needed to ensure that it continues to meet the needs of your business. As your business grows, so may your insurance needs.

By following these steps, you can get the commercial business insurance coverage you need to protect your business against the financial consequences of unexpected events.

FAQs

What type of business needs commercial insurance?

All businesses, regardless of size or industry, can benefit from commercial insurance coverage. From small retail stores to large manufacturing companies, commercial insurance can provide financial protection against the risks that businesses face in the course of their operations.

Does my LLC need commercial insurance?

It is generally recommended that all LLCs carry commercial insurance to protect against the risks they face in the course of their operations. This may include coverage for property damage, liability, and business interruption, as well as other types of coverage depending on the specific needs of the LLC.

Are commercial insurance and full coverage the same?

No, commercial insurance and full coverage are not the same. Commercial insurance is a type of insurance that provides coverage specifically for businesses, while full coverage is a term that refers to a comprehensive car insurance policy that includes both liability and physical damage coverage. 

Key Takeaways

  • Commercial insurance is a type of insurance that provides coverage for businesses against the financial consequences of unexpected events.
  • There are many different types of commercial insurance policies available, including coverage for property damage, liability, business interruption insurance, and more.
  • Commercial insurance is typically purchased as a standalone policy or as part of a business owner's policy, which combines coverage for both property and liability in one package.
  • The cost of commercial insurance can vary widely depending on the type of coverage needed, the size and nature of the business, and the specific risks the business faces.
  • It is important for businesses to carefully review their insurance needs and choose a policy that provides the appropriate level of coverage for their specific situation.

SmartFinancial can match you with a commercial policy that fits your business’s unique coverage needs. Just enter your zip code below or call 855.214.2291 to receive your free commercial insurance quotes.

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