Commercial Insurance – A Complete Guide
Insurance is the most effective way to mitigate potential risks in life. As a business owner, it’s important that you ensure your business is protected against any debilitating costs. Not being prepared for large expenses can leave you incapable of continuing to operate.
Commercial insurance has become a booming industry in the past few decades. More and more small business owners are beginning to appreciate the need to insure against potential issues in the workplace. This has had a positive overall influence on risk reduction.
The United States is one of the most litigious countries on the planet, which means your business is constantly open to the potential threat of legal action. But there are a host of other risks at play in the marketplace that business owners need to be aware of.
This page will help you asses the various reasons that commercial insurance might be right for you. Make sure to read on if you’re interest in all the different ways insurance can enhance the viability of your business
We’re experts on commercial insurance. Our team has vast experience helping people find the right insurance companies to work with. We understand how intensive the insurance shopping process can be – we’re here to simplify it.
We provide our readers with comprehensive information on commercial insurance and the types of benefits it can bring their businesses. If you’ve found that you’re slightly confused about commercial insurance and what it offers, this page is perfect for you.
We also provide recommendations on companies to work with. We research prospective insurance firms extensively to make sure that we provide you with a list of the most reputable firms in the industry.
Is Insurance Appropriate for My Industry?
The reality is that insurance is appropriate for almost any industry. No matter what type of company you’re running, chances are there are risks that you’re exposed to. But the type of insurance you need to get will vary depending on the exact industry you’re working in. Certain industries will require certain types of insurance and the size of your company will also dictate what type of insurance is appropriate for purchasing.
For example, if you work in a trade-based industry, such as plumbing, equipment insurance will be a lot more useful than it would be for someone who runs a summer camp. You should assess what niche you are situated in and determine what the most valuable components of your business are. Doing so will allow you to assess what the most important things to protect are. But you should also think about liabilities – for example, doctors to need to ensure that they have insurance against potential litigation.
Many insurance providers are happy to suggest different types of insurance for specific industries. In fact, some will sort out their insurance offerings based on industry. You can typically find sub-pages on insurer websites that will sort out the different types of insurance for you automatically. You should weigh up the potential costs of certain events in your business to determine if it is worth insuring.
Types of Commercial Insurance
There isn’t one set type of commercial insurance – insurers provide a wide range of different policies which can help you protect against a variety of issues. Each insurer will approach these different types of insurance in different ways – you can’t be sure to find insurance policies that are exactly the same across separate providers.
But for the most part, commercial insurance categories are fairly similar across different insurance companies. Below is a list with descriptions of the most common forms of commercial insurance available to you as a business owner.
Business Liability Insurance
This is a general form of commercial insurance. What it covers will depend on the policy that you choose from the insurer. Typically, it covers you for any law suits or actions brought against your company. America is a very litigious country, so it’s very important to make sure that you are covered against potential law suits at all times – legal costs can be huge.
Commercial Property Insurance
This is one of the most important forms of commercial insurance. It protects you against property damage and theft. If you own property that falls victim to a fire, this is the type of insurance that will help you recuperate the money. It is important to have this type of insurance if your business has a lot of physical assets with value.
Business Auto Insurance
Business auto insurance is just like consumer auto insurance, except it covers the vehicles that your business owns. You can often find policies that cover your entire fleet of vehicles – this can be an affordable way to make sure that you don’t front too much of the costs should there be issues with your vehicles or their drivers.
Workers Compensation Insurance
This type of insurance will help you protect yourself against any claims of worker’s compensation. If you work in an industry that puts its staff at risk of personal harm, you’ll most definitely need this form of insurance to help you prevent large claims against your business. Workers in the United States can win large settlements and compensation payouts – make sure you’re prepared for the costs.
Crime insurance helps protect you against potential theft or criminal acts. Many businesses attain crime insurance in order to protect against fraudulent activity from employees. If you have employees that have a lot of freedom to act on behalf of your company, your exposure to potential theft is quite high.
Business Interruption Insurance
Interruption insurance provides you with the peace-of-mind that your operating costs are covered should you not be able to conduct business. The most common uses for this type of insurance are after a fire, severe damage, or a natural disaster. It can be months before you can resume business, so this form of insurance can have a substantial positive benefit in the case of an emergency.
Business Income Insurance
This is type of insurance that covers your expected income in a case of crisis. It is very similar to business interruption insurance but can be more extensive in terms of providing you full compensation for your expected income.
Umbrella insurance is an extra level of insurance that extends past your traditional liability insurance. It helps you protect against extremely large costs and law suits. Sometime law suits can be more expensive than the value of your businesses assets, therefore, Umbrella insurance helps protect against this extra cost.
Cyber insurance is one of the quickest growing insurance types in the commercial insurance space. It helps companies protect against data breaches and other forms of potential costly cyber related expenses. If you’re worried that hackers might steal information or money from your business, this is the perfect type of insurance to attain.
Equipment Breakdown Insurance
If you’re a business that is reliant on heavy machinery or other forms of equipment to keep production going, you should make sure to get breakdown insurance. This will insure against any potential costs of your machinery not working. If you need to get your equipment fixed quickly, but can’t afford the costs, this type of insurance will help lift the burden.
Accounts Receivable Insurance
This type of insurance insures you against losses associated with a lack of payment from a client. If you work with large invoices, or you have large clients overseas in different jurisdictions, this is an important form of insurance to have.
The Importance of Due Diligence
Many individuals sign up for insurance policies without reading the fine print – this is one of the biggest mistakes you can make. Insurance policies are notorious for overselling at face value. Insurance providers grab people with misleading headlines, but don’t offer as extensive of coverage as they advertise.
It’s vital that you read your entire policy, not doing so can put you at risk of not being covered. While you’re comparing different insurance companies to work with, you should always make sure to compare their policies. Make sure that the most important components are fully covered – pay attention for creative wording that attempts to get out of certain liabilities.
If you’re confused about your policy, and don’t know whether something specific is covered, it’s often best to call the insurer directly and ask them whether something is covered. If they do say something is covered, make sure they put it to you in writing. You need to document any commitments that an insurance company makes to you. Having their word simply isn’t good enough – you don’t want to leave yourself over exposed.
Key Insurance Terms
If you don’t have much experience working with insurance companies, it’s important that you understand the terms they use when describing their services. Not understanding the correct terms can leave you with a misunderstanding of the policy you’re being offered. We’ve offered quick explanations of some of the most important terms in the industry below.
This is the agreement that you have with the insurance company for coverage. Your policy will detail everything that you are covered for, as well as what you are expected to be responsible for or pay for in case of an issue.
The term is the length of time that you are covered with your insurance policy. Some insurance policies don’t have terms, they simply continue to provide you coverage as long as you continue to pay.
This is the money that you pay to the insurance company for coverage. This is typically charged monthly, but sometimes you can pay for an entire year upfront.
This is the amount of the loss that you are responsible for paying. For example, some insurance companies might require you to pay the first $1,000 of any loss. This is put in place in order to prevent frivolous claims.
Be Careful with Your Claims
One of the biggest mistakes a business can make is to over claim on small issues. Many small business owners believe that they should claim for every loss that they have – this is a big mistake.
You need to assess your deductible and determine whether or not it is worth claiming. As mentioned previously, your deductible is the amount that you’re responsible for contributing towards a loss. If your deductible is higher than the amount you are attempting to claim, there is no point in notifying your insurance company of the loss.
In addition, if your deductible is only slightly lower than the loss of property you have incurred, you should consider not claiming. This is because the amount you claim will impact your future premiums. Insurance companies like to work with businesses that don’t claim often. Keep your premiums low and only claim for large expenses that have a substantial impact on the financial viability of your company.
Advantages of Commercial Insurance
After reading through this page, you probably have a pretty good idea of whether or not you should get commercial insurance for your business. But taking in so much information at once can be difficult. This section is dedicated to providing you with a short-form analysis of the advantages of receiving commercial insurance.
- Prepared for Emergencies – You don’t have to worry about disasters and emergencies ruining your business. You can have the peace-of-mind that you’re covered if something drastic is to happen to your company.
- Better Financing – Lenders look more favorably upon business owners who have insurance. They want to make sure they won’t lose their money if you end up having to make a large pay out or shut down your business. In fact, some lenders will require insurance, or offer better rates for those who are insured.
- Responsibility – If someone is hurt on the job at your company, you owe it to your employees to be able to cover the costs of their worker’s compensation. By being insured against this you are able to ensure that you will be able to compensate your workers fairly.
- Reduced Exposure – As a business owner, you will not be as exposed to natural disasters and other issues, which will allow you to focus more on running the operations of your business.
- More Competitive – If your business is protected against certain market forces and events, it’s more competitive in your niche. You’ll be able to withstand much more stressors if you’re properly insured against potential issues.
Disadvantages of Commercial Insurance
While there are many apparent advantages to having commercial insurance, there are also some disadvantages that you must keep in mind when you apply for a policy. We’ve outlined these in further detail below.
- Costs – Insurance is a constant cost on your business, you’ll have to pay monthly premiums to make sure that you’re covered. If you miss some of these payments, then you won’t be covered by your insurer.
- High Deductible – Some insurance companies have high deductibles, so you’ll sometimes have to pay to replace something if it doesn’t meet the deductible value.
- Lengthy Claims – Some insurance companies can take a long time to process claims, this means that you’ll end up out of pocket until they can process your claim.
- Over Confidence – Some companies act overconfidently because they are insured. This can create problems if an issue arises and you’re not covered.
- Increase After Claims – If you do claim, you might see a rise in your premiums in the future.
Exceptions: Acts of God
It’s important to note that no insurance policy covers everything. There are certain events that insurance companies can’t account for, and therefore they typically aren’t covered by most insurance policies. Insurers call these events ‘acts of God’. They describe anything that happens that is not directly influenced by man. Severe natural disasters tend to be a good example of this. If an insurance policy does not specifically mention a type of natural disaster or damage, it is most likely not covered.
For example, if a volcano were to erupt and cause travel delays, this would typically mean that travel insurance companies would not be required to pay out for compensation. This is because there is no way for them to accurately account for these types of events. It’s important that you understand you might not be covered for everything. If you’re looking to get a specific type of insurance, make sure the event that you’re attempting to insure against is covered by your policy. For example, if you live in a hurricane zone, make sure your policy stipulates that it covers flooding and wind damage.
The harsh reality is that you can’t prepare for everything. That’s why it’s important to have a slush fund even if you have fully insured your business. You don’t want to be shut down by an event that is out of your control. Ask your insurer what type of events they consider to be ‘acts of God’.
Tips and Tricks for Choosing the Right Insurer
Choosing the right insurance company is the hardest part of the process. Each different insurer will have different coverage stipulations and prices. You should try and work with an insurer that offers both credibility and affordability. There are hundreds of insurance companies in the United States, and while this might sound good, it can sometimes cloud your judgement.
You should begin your search on websites like ours, we provide a range of different suggestions for companies that you should work with. Our research can save you considerable time and money.
Once you make a short list of the companies you want to work with, you should begin to corroborate their reputation using consumer watchdog groups. The Better Business Bureau and Consumer Affairs are both great companies that help people understand how legitimate a company is. They do their own due diligence and provide a review platform for previous clients.
How a past client viewed their experience with an insurer is one of the best indicators of how you will enjoy your experience. Make sure you look for an insurance company that pays out quickly, doesn’t rip off their clients, and has a customer service team that is dedicated to maintaining good relations with your company.
If you own a business, there’s no excuse for not having some form of commercial insurance. It’s vital that you are able to prepare yourself for large, unexpected expenses. This is especially true if you have employees that could potentially get injured and file legal claims against your company.
Fortunately, it’s never been easier to obtain an insurance policy. You no longer have to meet face-to-face with an insurance agent to sign up for commercial insurance. In fact, you don’t even need to make a phone call. The entire process can be done from the comfort of your office – online applications can be made and accepted in a matter of minutes.
The main part of the process isn’t the application, it’s deciding on the types of insurance that you want to obtain, and finding the right insurance company to use. If you’re still trying to determine which types of insurance are appropriate for your business, make sure to check out some of the other pages on our site. We provide in-depth analysis of every form of commercial insurance currently available on the market.
Lastly, make sure that you are working with a company that has a great track record. There are so many insurance companies to choose from that you should never be forced to work with a dodgy company. While the insurance market has always had a bad reputation, there are plenty of great insurance companies that make considerable effort to provide the best possible services for their clients.
They understand the need for business owners to be protected against serious problems. And remember, the longer you wait, the more your business is exposed to potential problems. Policies can take a few weeks to come into effect, so you should make sure to apply for the insurance you need as soon as possible – not doing so can be costly.