What is Commercial Insurance – Overview
Commercial insurance provides coverage to businesses and corporations. It is mainly designed to cover losses for companies, employees and the business owner. As there are different types of businesses, they have different needs and situations. Hence, commercial insurance is available in various styles too.
Small business owners often wonder what kind of commercial insurance is best suited for their business. Though the answer varies, depending on the type of business, there are different types of commercial insurance programs that business owners should consider buying.
Numerous regulations in the United States mandate commercial insurance. It helps businesses to avoid liability against risks that could affect their growth and success. Some commercial insurance also protects the reputation and well-being of the business while keeping it safe against financial losses.
8 Common Types of Commercial Insurance
Commercial insurance differs from personal insurance as the former can cover multiple employees and stakeholders. This type of insurance also tends to have a much higher coverage limit as there’s the physical property at stake.
In addition, commercial insurance agents and providers are specially trained in the risks and threats that businesses face regularly and rarely. Commercial insurance plans are usually customized to a business’s specific industry and daily activities.
Some of the most common types of commercial insurance include:
1. General Liability
General liability insurance is meant to provide coverage against potential medical costs and associated legal fees in case a customer injures themselves at a business place, specifically due to something you or your employees did or failed to do. This insurance protects businesses against “advertising injury,” including events like libel and copyright infringement.
2. Business Interruption Insurance
Business interruption insurance comes in handy when the flow of your business is affected by a major storm, a power outage in the local grid, and even hacking incidents. This commercial insurance helps to build the confidence of business owners in case of an untoward incident that disrupts the normal day-to-day operations of your business.
This type of commercial insurance is meant to protect your business during covered events. It can even make financial reimbursement for business losses, besides providing funds to temporarily operate in an alternate location.
3. Workers’ Compensation
Workers’ compensation is an extremely necessary type of commercial insurance as it protects the business against injury to workers/employees during work hours. Though most small business owners tend to believe that an untoward accident cannot happen at their workplace, the facts tell a completely different story.
Without a proper workers’ compensation plan in effect, damage for injuries acquired at work can cost thousands of dollars and even millions in some cases. Business owners are prone to punitive damages, suffering and pain lawsuits, and potentially high medical bills without sufficient insurance coverage.
Workers’ compensation insurance is also mandatory for businesses with more than one employee. It is highly advisable to check your local requirements, as these vary slightly. The cost of buying a workers’ compensation insurance policy is significantly more affordable than the potential cost of a lawsuit.
So, it makes complete sense to be proactive with extensive workers’ compensation insurance coverage. The workers’ compensation policy usually covers out-of-pocket expenses, such as medical bills and lost wages.
4. Commercial Auto Insurance
Commercial auto insurance basically covers against loss of, or damage to, workers and equipment, both financially and medically. Such damaging events are unpredictable, and commercial auto insurance helps to minimize the risk. This affordable and cost-effective insurance plan ensures that employees and business automobiles can work without disruption.
5. Employment Practices Liability Insurance
Employment practices liability insurance (EPLI) coverage assists with employment-related claims. It is offered as a stand-alone product or can be combined with existing commercial insurance policies. This type of commercial insurance is designed to protect businesses against employee lawsuits alleging unfair or inappropriate acts. Violating an employee’s rights, knowingly or unknowingly, can have devastating consequences for business owners and employers.
EPLI is offered on a claims-made or occurrence-based coverage to prevent these consequences. Most EPLI policies are claims-based, meaning that coverage comes into effect when a claim is first made against the insurance holder while the policy is active.
6. Cyber Insurance
Cyber liability insurance policy is crucial for small businesses as these are often victims of identity thefts, owing to the lack of a high-tech security system. This insurance policy offers coverage against data breaches and the losses resulting from them.
In a data breach, important and private customer data, such as name, date of birth, addresses, etc., can end up in the wrong hands. Commercial insurance protects businesses by covering some of the costs resulting from a data breach, such as customer notification and legal fees.
7. Management Liability Insurance (D&O)
Management liability insurance also called Director and Offices (D&O) insurance, is designed to protect directors and officers in case they are personally sued during the management of a business organization or even a non-profit organization.
This commercial insurance covers costs and damages (settlements and awards) arising from wrongful action allegations and lawsuits brought against members of the board of directors or an officer of the organization.
A management liability insurance policy helps reimburse a business for the expense of legal fees, settlements, and other costs related to defending against a lawsuit.
8. Errors and Omissions Insurance (E&O)
Errors and omissions insurance is also called professional liability insurance. This commercial insurance policy is meant to protect businesses from the consequences of an error or omission on the part of the business owner or employee, which causes a lawsuit to be filed against the business organization.
Businesses that provide any kind of service for a fee should have E&O insurance coverage. This covers several situations that conventional business liability insurance does not. For instance, E&O insurance policies are highly advised for lawyers, real estate businesses, financial brokers, architects, designers, and even medical professionals should have an active E&O insurance plan in place.
As seen above, different types of commercial insurance policies are available in the market. Commercial insurance is necessary to safeguard businesses against numerous types of liabilities and risks, such as employee injuries, damage to business property, compensation, and more. It is highly advisable to consult with a local insurance agent to understand the specific commercial insurance types even more.
I am a dedicated healthcare researcher and an enthusiast specializing in medical grants, medical education and research. Through my articles, I aim to empower healthcare professionals and researchers with valuable insights and resources to navigate these critical aspects effectively.