What Is Commercial Insurance? A Beginner’s Guide
What is commercial insurance? If you are a small business owner, that is a very important question to be asking yourself. In short, commercial insurance is something that could save your business in the event of a lawsuit or another unforeseeable event. There are several different types of insurance for businesses. In this article, we will answer the question, “what is commercial insurance?” and give you information that will help you protect the assets that you have worked so hard to attain.
What Is Commercial Insurance?
Commercial insurance is a type of coverage that will compensate you financially in the event of certain accidents, errors, and claims made against you. Not all commercial packages are the same. Some plans protect certain assets (like your vehicles), other plans focus on different aspects of your business (such as your responsibility to pay worker’s compensation in the event that one of your employees suffers an accident while on the job).
In this article, we will discuss the following types of commercial insurance:
- Commercial Auto insurance
- General Liability insurance
- Professional Liability insurance
- Worker’s compensation
- Property insurance
Commercial Car Insurance
What Is Commercial Insurance for Vehicles?
If you own vehicles that you use for business purposes, commercial insurance is the type of coverage that will protect you against accidents that occur while your vehicle is being used in the work context. The types of damages it covers depends on your plan and can include damage to your vehicle, damage to other people’s property, and injury to others.
What if You Already Have Personal Auto Insurance?
Personal auto insurance policies only cover you when you use the insured vehicle outside of work and while commuting. If your business use of the vehicle extends beyond commuting, your personal auto policy will not cover any damage that occurs while you use the vehicle for work.
What Kinds of Business-Related Tasks Require Commercial Insurance?
Here are some examples of how you might use a car in a business context:
- Delivering pizzas
- Driving clients to and from the airport
- Taking real-estate clients to see different properties
- Transporting work equipment via a trailer
- Doing construction work
- Taking tourists to various attractions
What Kinds of Vehicles Can Get Commercial Insurance?
In addition to cars, tractors, trailers, vans, buses, and construction vehicles can be insured under a commercial policy. Many of these vehicles are not eligible for a personal policy. The reason why they require more extensive coverage than personal vehicles is that, statistically, vehicles that are used for work are on the road at riskier times and have a greater chance of getting into accidents.
General Liability Insurance
What Is General Liability Insurance?
General liability insurance protects you against third-party claims involving bodily injury, other types of injury, medical payments, and property damage. If someone who is not an employee gets hurt as a result of your business activity, his or her claim can be covered under this type of policy. Similarly, if you do damage to someone’s property (either because you rented it or because it belonged to a client for whom you were doing work), this kind of policy can protect you.
General liability insurance covers both your payouts and your legal expenses. It can be used regardless of whether or not you are truly at fault in the situation. It is important to note that general liability insurance does not cover injuries and property damage resulting from a business vehicle. Those situations require commercial auto insurance. Also, it does not cover injuries to your employees or damages to their property. For that coverage, you need a worker’s compensation policy.
In the course of running a business, you run the risk of causing bodily injury to others. For example, if you have a shop, one of your employees might knock over a box of inventory onto one of your clients. Similarly, in a restaurant, an employee might spill a pot of hot coffee onto someone.
The injury might not be directly caused by you or an employee. Maybe someone will trip on the steps leading up to your storefront. The injury might occur from a product you provided or a service you did. Examples include:
- A case of food poisoning from a restaurant meal
- A poorly done electrical job that results in someone getting shocked
When an injury occurs, there are usually medical bills for which you are liable. There might even be funeral expenses. When you have general liability insurance, your plan will cover these costs up to your limit, minus your deductible.
Sometimes, third-party claims against you pertain to other types of injury. These include:
- Copywrite infringement
- Other verbal injuries that come about as a result of work communications (written or verbal) between you, your employees and others
These types of injuries and others are covered by general liability insurance.
Damage to Property
General liability protects you in the event that someone’s property gets damaged as a result of your actions, your employees’ actions, or issues involving property that you own. Examples include a faulty plumbing job that results in a flooded basement or a tree that an arborist causes to fall on someone’s home. Like in the case of bodily injury, the problem might arise from a product you sold or a project you completed in the past.
Professional Liability Insurance
What Is Professional Liability Insurance?
Professional liability insurance goes beyond general liability insurance. It covers you in the event of a professional error (real or alleged) or a service that did not meet your client’s satisfaction. It does not pertain to injuries or property damage. Like general liability insurance, professional liability insurance can be effective whether or not a claim is frivolous. In the event that there is a claim, professional liability insurance covers the payout and your legal expenses (up to your limit, minus your deductible).
What Kinds of Businesses Might Need Professional Liability Insurance?
The following professionals generally involve consulting with clients and/or provide the kinds of services that put them at risk for claims of negligence:
- Business consultants
- Real estate agents
Worker’s Compensation Insurance
What Is Worker’s Compensation Insurance?
Worker’s compensation covers you in the event that one of your employees gets injured or sick while performing their work-related responsibilities. Most states, including Florida, require you to have worker’s compensation insurance if you have employees. When an accident occurs, such as a worker hurting their back while moving heavy equipment or dropping a tool on their foot, this type of insurance can pay their medical expenses, recovery, and (in some cases) death benefits.
Why Do You Need Worker’s Compensation Insurance
If you have employees, it is important to have worker’s compensation because it protects you twice. First, it can cover the cost of the accident. Second, if you do not have it, and an accident occurs, you can be sued for breaking the laws that require you to maintain a certain level of coverage. However, if you are a small business owner operating on your own without any employees, you do not need worker’s compensation insurance.
Property Insurance for Businesses
What Is Commercial Insurance for Property?
Business property insurance covers you in the event that the property you use for business gets damaged. Property can include the space in which you do business, such as a shop or warehouse. You can get property insurance whether you own the space, rent it, or lease it. Your property also includes your inventory and equipment.
What Kinds of Accidents Are Covered by This Type of Insurance?
Property insurance is usually effective for damage due to fire, explosions, storms, vandalism, and theft. Situations that are usually not covered include earthquakes and floods. However, if you are in an area where you are at a high risk of an earthquake or a flood, you can often purchase extra coverage.
What Kinds of Property Can You Insure?
Aside from your building(s) and the space in which you do business itself, you can insure:
- Certain other items that are used for business
Frequently Asked Questions About Commercial Insurance
How Much Does Commercial Insurance Cost?
The amount you will pay for commercial insurance depends on the policies that you choose, the kind of business that you operate, and the kind of property listed on your policies. Statistically, certain businesses carry a higher risk of damages than others, resulting in higher premiums. For example, a real estate agency will typically pay less for commercial insurance than an arborist’s company.
The size of your business can also affect the cost of your commercial insurance. Each employee represents an increased risk for accidents. Therefore, smaller businesses tend to pay less. If you have no employees, you will not need worker’s compensation, which will lower your costs. Similarly, the more vehicles your business owns, the more you will pay for commercial auto insurance.
Is Commercial Insurance Required by Law?
The laws regarding insurance coverage vary from state to state. In Florida, you are legally required to have worker’s compensation insurance if you have employees. General liability insurance and professional liability are not required. However, if someone successfully files a claim against your business, and you do not have liability insurance, your business will be legally required to pay out of pocket. All vehicles are required to have auto insurance. Only a commercial policy will protect you from accidents that happen while you are using your car for work.
What Is the Difference Between a First-Party Claim and a Third-Party Claim
For insurance purposes, you are the first party, and everyone who is not affiliated with your business is a third-party. Some commercial policies protect you in the event that a third party is injured or suffers damage to their property, but they do not cover first-party claims.
To cover yourself in the event that you are injured or incur damaged property, you need to purchase a policy that specifies this type of protection. For example, if you own a contracting business, a general liability policy will protect you in the event that one of your employees shatters a client’s window accidentally. However, if a piece of equipment that you own is stolen, it will not reimburse you the amount needed to replace it. For that, you can purchase commercial property insurance.
How Can I Determine Which Commercial Policies Will Benefit My Business?
Our agents can help you choose the policies that will provide you with the coverage you need without going overboard. The key is to review your business activities and determine where you are legally required to have coverage and where you might incur damages. Without the right coverage, one uninsured accident can leave you liable to pay an amount that you cannot afford, resulting in the loss of everything you have worked to establish.
Having the right amount of insurance not only protects you in the event of an accident; it can give you peace of mind, letting you focus on running your business. Our agents can review the details of your business activity to help you select certain policies and rule out others. For example, imagine that you have two cars and that one is used for getting to and from work while the other is used to transport clients. Our agents will probably recommend a personal policy for one and a commercial policy for the other.
So, What Is Commercial Insurance?
In summary, commercial insurance is a type of coverage that can protect your business and its assets. It includes policies that pertain to your vehicles, your workers, and your property. The commercial insurance needs of each business are different. They are determined by the size of the business, the location, and the kinds of products and/or services it offers. Our team can help answer the question “what is commercial insurance” and recommend the right coverage so that, in the event of an accident, your losses are minimized.
Still wondering “what is commercial insurance”? Contact Absolute Choice Insurance for more information on how we can help protect your assets. You can reach us by phone or on the internet:
South Florida Phone: 305-275-1777
Central Florida Phone: 407-344-4444