The Common Types of Commercial Insurance Explained

Chances are you’re already familiar with auto and health insurance, but when it comes to running a business, there’s a whole new array of commercial insurance that you need to consider. Well, running a company can be tough, and choosing the ideal type of insurance for the business can even be tougher. With the huge range of brokers, agents, products and services out there, making the right decision can be hard. As a business owner, you face substantial risk to your livelihood on a daily basis. The potential for lawsuits, loss, lack of legal compliance all pose severe hazards to the daily operations of any business. For this reason, we have listed the most common types of commercial insurance to help you assess your risk and be able to address it accordingly.

The Common Types of Commercial Insurance

General Liability Insurance

Ideally known as business liability insurance, this type of coverage is very important as it helps protect you in case you are sued by a third party/anyone outside the company. General liability insurance helps cover legal fees and any settlement if you’re sued. It comes in handy by covering the damages that you are found liable for and also helps with your legal fees. There are several policies that fall under liability insurance including:

  1. Errors & Omissions Insurance (E&O)

This policy is important if your company provides physical help or care to patients or gives advice, recommendations or designs products.

  1. Directors & Officers Liability Insurance

D&O is a policy that protects officers and directors of organizations and corporations if there’s a lawsuit claiming that they conducted business without putting the rights of the shareholders into consideration.

  1. Employment Practices Liability Insurance

This policy covers damages for violating employees legal or civil rights.

  1. Business Identity Theft

This is a policy that protects companies in situations that involve identity theft or fraud that’s in the same lines.

Property Insurance

This is another type of business insurance from Procom Insurance that you should certainly consider. It protects your company buildings and the assets or possessions inside. It covers your entire business property from theft, vandalism, damage and fire. Depending on your plan, the items covered include inventory, technology, furniture and anything used to run your business. This kind of coverage is very important, particularly if your business profit depends on having a physical location such as a clothing store.

When shopping for property insurance, you may want to consider business interruption coverage as well. This is a policy that gives you income when your business is unable to operate like when there has been a flood or fire. If you don’t have this policy, you won’t protect your earnings at this times and you could suffer a substantial revenue loss.

Workers’ Compensation Insurance

This one is actually mandatory in most places. If you have a certain number of workers, usually at least three or five, then you must purchase workers’ compensation coverage. It pays for any medical care and replaces partial wages for a worker who sustains an injury in the line of duty. If an employee dies from the injuries sustained while working, then the compensation is provided for their loved ones.

Umbrella Policies

This is a form of coverage that may come in handy if you are at a risk of major lawsuits or losses. Basically, it offers protection for anything that goes beyond what your other policies cover. So, if you get sued for $3 million, and your general liability coverage will only cover you for $2 million, then the umbrella policy will typically cover the remaining $1M. It can often be applied to other types of liability insurance policies.

Business Auto Insurance

This is an important policy of you have vehicles owned by your company. If a worker driving one of your business vehicles and injures another individual or another car, then this policy generally covers the costs that you’re liable for.

Keep in mind that if you are using your personal vehicle for business, some auto insurance policies may exclude coverage for accidents if the vehicle is mainly used for business. You should double check with your insurance agent or broker to see whether switching to commercial auto insurance is a good idea.

Terrorism Insurance

This is a policy that requires commercial property owners to give business owners the opportunity to get coverage against terrorist attacks. The Terrorism Risk & Insurance ideally requires business owner policies to offer the coverage in packages, but small business owners aren’t required to purchase it.

Key Employee Insurance

This is a policy that compensates the company if a valuable employee becomes disabled or dies. It’s a policy that can help mitigate any adverse effects of losing a key member of the team.

Individual and Group Healthcare Insurance Plans

If your firm has fewer than fifty employees, then you do not have to offer health insurance. However, you can still get group health insurance to cover your workers.

Group health insurance policy can cover you, your loved ones, your employees and even their dependents depending on the policy plan. Also, there might be tax incentives available. As the employer, you will cover a percentage of the premiums. However, you need to qualify as a business in your region in order to get this type of coverage. To find out more, you can consult your accountant or tax professional.

An individual healthcare plan, on the other hand, can’t cover your workers, meaning they will have to purchase individual plans for themselves. However, it is important to consider the welfare of your team. If you don’t offer health insurance, particularly with full-time positions, then you might be missing out on getting excellent employees and risk losing the great ones that you already have.

These are the most common types of commercial insurance policies out there. They are indeed several and the ones you need will depend on the model, size and requirements of your business. It’s always wise to seek the advice of a professional to ensure you purchase the right policies and not end up losing money or overspending.

Melissa Thompson
Melissa Thompson writes about a wide range of topics, revealing interesting things we didn't know before. She is a freelance USA Today producer, and a Technorati contributor.