Business insurance includes a broad range of policy options designed to protect businesses from financial loss. Every commercial operation has its own unique set of risks, which means a commercial insurance policy must be tailored to the business.
Many factors, from the size of your company, to the number of workers you employ, the materials they handle, and whether you have business vehicles, will determine the specific coverage you need to mitigate risk and protect your company’s financials.
Many business owners find that they must turn to a number of different insurance companies to get all of the coverage needed to cover their risks. If you work with an independent agent like those at Allen Insurance and Financial, you can get all of your business insurance policies from one office.
Business insurance coverage for a commercial operation can include the following and more:
- General liability insurance: Covers third-party liability claims for injuries to other people.
- Professional liability and malpractice insurance: Covers professionals against loss due to negligent professional duty, wrongful acts, and advice and services that lead to another person’s loss or injury.
- Product liability insurance: Covers against faulty products and damage, illness, injury or death that may occur from using a faulty product.
- Property insurance: Covers loss and damage to your commercial business property due to fires, storms and other causes.
- Commercial vehicle insurance: Covers commercial vehicles and drivers for collision, liability, property damage, personal injury and comprehensive coverage (also known as “other than collision”).
- Workers’ compensation: Covers your employees if they get ill or are injured while working on the job.
- Loss of income: Covers your business expenses, such as rent and employee wages, if you can’t operate your business.
- Key person insurance: Covers loss of income that may result from the head of the business or other key personnel becoming incapacitated or passing away (also known as key man insurance).
- Cybercrime insurance: Provides protection for risks due to Internet use and online communications.
- Records retention policies: Covers loss of important data and financial records.
- Specialty coverage: Insurance that covers various specific business risks, such as those of landlords, farmers, and commercial operations that put on one-day events, such as seminars or concerts.
Business insurance is a contract between the insurance company and the business. The insurance company agrees to provide financial protection in the event of a specified loss in exchange for premium payments.
At the time of a loss, the business will file a claim. If a fire destroys a portion of the business premises, the company will file a claim against the property insurance policy.
An adjuster will assess the damage and process the claim. The company will then receive the appropriate amount of compensation for the loss, less any deductible.
There are many different scenarios with regard to business risk and how insurance claims are filed. If the incident is a loss suffered by a customer of the company, the injured party is likely to file a claim against the business’s liability policy.
How the claim is processed depends upon the size of the claim, whether the matter can be settled with an insurance payment, and if the claim results in a lawsuit.
A deductible is the amount you’re responsible for in the event of a covered loss. In most covered loss cases, you are responsible for any amounts up to your deductible level and your insurance would cover anything beyond that up to your coverage limit. For example, if you select a $1,000 deductible and have a $4,200 covered loss, you would receive a claim payment of $3,200 after deducting the $1,000.
A deductible applies to each claim. If you have more than one claim in a policy period, you will be responsible for the deductible amount for each individual claim regardless of the number of claims you have during that policy period.
Commercial property insurance is the type of business insurance that covers your business’s physical property, equipment, and possibly stock and inventory. Basically, it can cover your office building and nearly anything that’s inside it.
Commercial property insurance typically is part of something called a commercial package policy. A commercial package is made up of various types of commercial insurance, including commercial property, general liability, and could include other types of insurance as well.
It’s common to have both your commercial property insurance and your general liability insurance with the same company, which creates a package policy. However, this isn’t usually required and there are many insurance companies that will just insure your commercial property, while another company will insure your general liability.
General liability insurance, also known as commercial liability insurance, is a broad commercial insurance policy covering general liability exposures of a business.
General liability provides insurance protection for a company’s assets, financial obligations, legal defense, and any settlements or judgments awarded to an injured party.
It may also include claims for copyright infringement, false or misleading advertising, or libel and slander. If a patron is injured in some way in the course of doing business with your company, your general liability insurance will provide coverage.
Allen Insurance and Financial recommends that all businesses have general liability coverage in place.
The cost of business insurance varies. A number of factors affect the cost, because it depends on the type of business and the types of coverage appropriate for that commercial operation.
A typical cost for business insurance coverage is $200 per month. Cost also depends on the size of the business. A small, home-based business can often be adequately insured for less, while insurance for a large company with many employees and a wide range of business risks will cost substantially more.
The costs of business insurance can be reduced with effective risk management practices, and by comparing costs from several different insurance carriers.
An independent insurance agent who specializes in commercial insurance can help with this process, and can manage a company’s complete business insurance portfolio through one office.
Business insurance is tax-deductible, as long as the coverage is for the purpose of operating a business, profession, or a trade. Businesses may not deduct their business insurance premiums if the coverage is for the purpose of a self-insurance reserve fund or a loss of earning insurance policy. Consult your tax professional for advice.
Business insurance is required by law, but only under certain conditions. The following business insurance is required by law if it is applicable to your situation:
- Unemployment insurance: Applies to a business that has employees and may be obligated to pay unemployment insurance taxes under prescribed conditions. If these conditions are applicable to your business, then you must register your business with the state work force’s agency.
- Workers’ compensation insurance: If your business has employees, you are most likely legally obligated to carry workers’ compensation insurance, either on a self-insured basis or through a commercial insurance carrier or a state workers’ compensation program. Workers’ compensation laws vary by state.
- Professional liability insurance: Some states require specified professionals to carry insurance against professional liability.
- Disability insurance: Several states require that a business have partial wage replacement insurance coverage for eligible employees for non-work related injury or illness. These states are California, Hawaii, New Jersey, New York, Puerto Rico and Rhode Island.
Depending on the nature of your business and any insurance that you are legally obligated to carry, the following types of business insurance should be considered essential:
- General liability insurance: Coverage against accidents, injuries and negligence claims.
- Product liability insurance: Coverage against product defects.
- Professional liability insurance: Covers professionals against malpractice, negligence or errors.
- Commercial property insurance: Covers against damage to your business property, such as from a fire or a severe storm.
- Business interruption insurance: Protects your business if you are no longer able to conduct your business because of a loss.
Some businesses need specialty coverage for equipment, shipping and other risks. Because commercial insurance needs to be tailored to each business based on risks, it is critical to work with an agent, who will get to know your company and ensure that your coverage adequately protects your business investment.
If your business carries commercial crime/theft coverage, your business insurance will cover employee fraud and embezzlement.
There are several different forms of employee dishonesty coverage. You can purchase several types of fidelity bonds to protect the business in the event of dishonest acts by all employees, or by named employees.
In order for your business insurance to cover flood damage, your company must carry a separate flood insurance policy or endorsement. A typical commercial property insurance policy covers specific water damage situations but excludes flooding.
The wording and water damage exclusions vary from one insurance company to another. Be sure to review your policy carefully and discuss your specific risks and concerns with an independent insurance agent who can help you get the coverage you need.
Errors and omissions insurance (or E&O) is a form of professional liability insurance. It covers a business for services rendered that did not have the expected or promised results, or that result in a loss or personal injury suffered by the person receiving those services. It also covers situations where the individual or company failed to render services at all. Engineers, stockbrokers, accountants, insurance agents, and lawyers may be covered by E&O.
Malpractice insurance is also a form of professional liability insurance. Malpractice insurance covers healthcare professionals, physicians, dentists, pharmacists, and others.
A Business Owners Policy (BOP) is insurance that allows a business (that meet certain criteria) to combine coverage from multiple policies into one convenient package. BOPs are created for businesses that face similar risks and often appeal to small and medium-sized businesses. However, larger companies can purchase a commercial BOP package and customize it to fit their needs. These days, there’s a BOP for most mainstream businesses, from hair salons to hardware stores, which makes the process easier.
Business insurance covers lawsuits, as long as you have the appropriate business liability insurance for your situation and enough liability coverage to pay your legal costs.
To ensure that enough liability coverage is in place for extreme circumstances like a lawsuit that exceeds $1 million in damages, many businesses buy a commercial umbrella liability policy.
Certain liability exclusions also apply, such as if an injury or damage was expected, or was caused intentionally. Some policies also have something called a “workmanship” exclusion, and some exclude coverage of punitive damages.
Liability insurance is available in many different forms, including:
- General liability
- Professional liability, errors and omissions and malpractice
- Directors and officers liability
- Product liability
- Premises or property liability
- Employers’ liability
- Employment practices liability
- Environmental and pollution liability
Builders’ risk insurance is a policy that will help pay to repair, replace or recover the current value of a construction project. This includes a number of different claim types such as fires, theft, labor costs and natural disasters.
As a builder or building owner, having the proper builders’ risk policy in place could save your project and you thousands of dollars in expenses.
Finding the right local independent insurance agent that is experienced in the different types of builders’ risk policies is key to a project staying on track.
The majority of the time financing is involved in a building project and most financial lenders require a builders’ risk policy to be in place prior to any work being performed.
However, there is the off chance that the project is fully funded by either the builder or the building owner and no proof of builders’ risk insurance is required. Having it as part of your practice is a wise decision and usually an inexpensive one at that.
Every business needs insurance but policies can get pricey. Sometimes a BOP is less costly than individual policies which is why it’s appealing. Furthermore, if there is damage to your property or the property of others, employee theft, mechanical difficulties, or an everyday accident at your business that causes a loss of income, a BOP can keep you from having to close your doors as a result of the expenses related to the events.
Terrible things can happen if you don’t have a BOP:
- Financial ruin: Why risk paying out of pocket and possibly going bankrupt, when you could just pay for a BOP that is fairly inexpensive?
- Lawsuits: Legal issues can not only be costly, but they can also be very time-consuming, so one accident has the potential to bring down your business.
- Losing your stuff (or other people’s stuff): Recovering the costs of theft, damage to buildings or broken equipment could send your company into a downward spiral.
Your standard business needs a variety of liability and property insurance. Depending on your risks, you may have to purchase these policies individually or you may qualify for a BOP. BOPs provide most of this insurance coverage but under one package which makes it more affordable for businesses.
Your coverage under a BOP can include:
- Property: The building and its contents.
- Property of others: In case your business provides a service on property like a repair shop.
- Business interruption: Lost income and employee salaries while you rebuild after a disaster.
- General liability: For any time that you might be sued.
- Employee dishonesty coverage: In case an employee steals from you.
- Mechanical/machinery difficulties.
- Front store window replacement.
- Hired and non-owned autos (i.e., you don’t own a company car but employees are still driving for the job).
- Loss of valuable papers.
While the above coverage might be enough for your business, you may need additional coverages that are not covered by a BOP.
The following is NOT covered under a BOP:
- Professional liability
- Auto insurance
- Workers’ compensation
- Health and disability insurance
- Flood and sewer back-up
- Cyber risk insurance
- Terrorism insurance
For each of the above, you’ll need separate insurance policies.
While a BOP is good for nearly any business, there are some businesses that have general lower risks and are well suited for a BOP. Insurance companies determine a business’s level of risk based on any claim history and conditions such as safety and health concerns, the likelihood of theft, burglary, or damage from a natural disaster, and business that are in high-risk industries. The lower the risk of your company the less complicated insurance coverage you need. This makes it convenient to go with a BOP.
The following businesses are good candidates for a BOP:
- Retail stores
- Professional services
- Pet groomers
- Auto repair shops
For companies in high-risk industries like agriculture, mining, construction, health care, gun shops and even computer stores, a BOP policy might not be the best fit. Companies that run high risks or are in unique industries require a specific insurance package and a certain amount of coverage. For these businesses, a BOP might not offer the coverage type or amount that your business needs.
A BOP is also not a good fit for a business that needs something that’s not offered within the policy, such as professional liability insurance. Businesses that usually need professional liability insurance include fitness trainers, photographers, beauty technicians and anyone who runs the risk of being sued by a client for not producing an adequate enough product. Since professional liability is not offered with a BOP and cannot be added to a BOP it wouldn’t be the best choice.
Your independent insurance agent can help you determine whether a BOP is a good choice for your business.
Business liability insurance protects your business in a variety of scenarios in which your company is negligent or causes harm to individuals or other businesses. Commercial general liability insurance (CGL) is the most important component of your business liability coverage. It is the first line of defense from lawsuits and liability claims against your business.
Any business owner, no matter how many precautions he or she takes, is at risk for liability claims. Liability claims can arise from injuries or property damage that occur on your business property, or those that are caused by you or your employees in the course of doing business.
CGL policies pay for attorney fees and any judgments that you might have to pay if you are sued, and also provide coverage for claims of libel, slander, copyright infringement, and false advertising.
That’s a lot of coverage! But CGL insurance still does not cover every type of liability exposure that you might have. Let’s just say that it covers the basics, but since every business is unique, you may need deeper liability protection depending upon the type of business you do and the risks you face. You may need additional commercial liability policies, or you may need to add endorsements to other insurance policies in order to cover all the bases.
While commercial general liability (CGL) coverage is quite comprehensive, not every type of business liability exposure is covered. After examining the exclusions, you might find gaps for which you have to purchase additional coverage.
Here are some of the most common CGL exclusions (not an exhaustive list).
- Certain types of liability claims covered under other types of insurance policies, including workers’ compensation, professional liability, commercial auto liability, and directors’ and officers’ liability coverage
- Pollution liability claims
- Claims resulting from damage to the property of others that is in the care, custody, and control of the business (e.g., vehicles at an auto repair shop)
- Product recall liability claims
- Any legal actions that do not involve a claim for bodily injury, property damage, personal injury, or advertising injury
- Most contract disputes
- Actions by a governmental agency related to failing to follow regulations
- Claims for back taxes
- Failure to provide a safe workplace
- Professional negligence, or errors and omissions claims
Business owners can purchase other types of liability policies to fill any gaps that they have, or you can often add endorsements to your CGL policy for certain types of liability coverage.
Cyber liability insurance is a contract between a business and an insurance company where the insurer agrees to pay for expenses like fees, fines, lost income, and public relations (depending on coverage) to help the company recover from a number of threats and incidents.
If your company gets hacked, cyber liability insurance can help save you from a door-closing disaster in a number of ways which means it’s pretty important coverage to have. The only time we’d agree you don’t need cyber liability insurance is if you don’t keep any of your company or client’s information accessible via technology.
Some bad things that could happen:
- Deletion/alteration of data, transmission of malicious code, denial of service
- Loss of private data and/or communications in paper and digital formats
- Invasion of privacy and/or copyright/trademark violations
Though hackers remain the number one cause for cyber insurance claims, there are a number of big threats out there that can happen at any time.
Fortunately, a cyber liability insurance policy can help protect your company against a big number of breach events.
Cyber liability insurance provides coverage for:
- Privacy liability: Fills the gaps between state- and federal-specific definitions after a data breach
- Privacy regulatory claims: Legal defense expenses, fines and penalties assessed by federal, state, and local authorities
- Security breach response: IT forensics, customer notifications, PR, and credit monitoring services
- Security liability: Addresses the human element and allegations of a “Security Wrongful Act”
- Multimedia liability: Defamation, libel, slander, copyright, and more
- Cyber extortion: Expenses and payments (within limits) to a harmful third party to avert potential damage
- PCI-DSS assessment: Compliance assessments and expenses involving cardholder information
- Cyber deception extension: Extensions respond to an intentional or misleading material facts contained or conveyed within an electronic or telephonic communication(s) that are believed to be genuine
- Business income and digital asset restoration: Provides for lost business and earnings, expenses, and digital-asset restoration costs
You’ve probably heard of auto gap insurance — a separate policy to cover the difference between what car insurance covers and what is still owed on the loan for a vehicle.
Employers liability insurance is purchased with the same thought in mind: to protect your business from costs resulting from employee claims that are not covered by workers’ compensation benefits.
It covers the gap between your company’s bottom line and lawsuits stemming from employee activities. Some insurance companies and state regulations even refer to employers liability insurance as “stopgap coverage.”
Your state, or the county in which you do business, may even require you to carry employers liability insurance. Which is why it’s important to work with an experienced insurance agent who is familiar with your industry, the area in which you do business, and any laws with which you must comply.
You may already have a professional liability policy, an EPLI policy (employment practices liability insurance), a general liability policy, and perhaps a host of other coverages to protect your business from liability risk exposures.
Do you really need another liability insurance policy? Yes. Not one of these products fills the gap between workers’ compensation and your revenues and assets, but employers liability insurance does.
As great as employers liability coverage is, it still doesn’t cover everything. It also contains exceptions, such as:
- Punitive or exemplary damages because of bodily injury to an employee who is employed in violation of the law.
- Bodily injury to an employee while employed in violation of the law with the employer’s knowledge.
- Any obligation imposed by a workers’ compensation, occupational disease, unemployment compensation, or disability benefits law, or any similar law. These types of losses are covered under the specific policies designed for these exposures.
- Bodily injury intentionally caused, or aggravated, by the employer.
- Bodily injury occurring outside the United States, its territories, possessions and Canada. Note that this exclusion does not apply to bodily injury if a citizen or resident of the United States or Canada is temporarily outside of the country.
- Damages arising out of wrongful termination, discrimination, harassment, and other workplace-related wrongful acts. Coverage for this exposure is provided under an employment practices liability policy.
Many businesses owners are under the misconception that any employee injury on the job is covered by their workers’ compensation benefits. In reality, there are several exceptions that aren’t. However, they are covered by employers liability, like:
- Third-party countersuits. Say an employee is injured due to equipment malfunction while operating a forklift. They file for workers’ compensation and your business is covered, right? What if they also sue the manufacturer of the forklift? The manufacturer’s lawyers will most likely bring a cross suit against your company, claiming the malfunction was due to improper maintenance. Workers’ compensation won’t help you fight that case, but employers liability insurance can step in.
- Loss of consortium. In most cases, an employee who receives benefits from a workers’ compensation claim can’t file a lawsuit against the employer. However, nothing prevents the spouse of the injured employee from filing a claim against your business asserting that they have suffered losses due to the injury. Employers liability insurance can pick up the tab for these types of claims.
- Dual capacity suits. These are lawsuits brought by an employee against the employer when the injury stems from a product manufactured by the employer. In such cases, the employer is liable, as both an employer and a manufacturer. Workers’ compensation can’t handle such complicated cases, but employers liability insurance can.
- Gross negligence claims. If one of your managers directs an employee to do something that the manager knows is dangerous and could result in an injury or worse, your business can be held liable, and workers’ compensation will not come to your aid. These are the most common type of employers liability claims and are commonly filed by spouses after a fatality where they believe the employer disregarded the employee’s safety.
Many policies have limits on what they will pay out on these claims. You can choose higher limits and pay slightly higher premiums, but rates are usually fairly cheap for an additional $1 million in coverage.
Or, to increase your limits, you may want to think about a commercial umbrella policy, which works above the employers liability coverage. Your agent can help steer you toward the right choice for you.
Employment practices liability insurance, commonly referred to as EPLI insurance, is specifically designed to protect employers from lawsuits brought by employees. It provides coverage for many situations that general liability insurance does not.
Even lawsuits that are thrown out of court or are won by your company are expensive, due to the high cost of securing legal defense. Therefore, this insurance coverage is very important as financial protection for your business enterprise.
Unless you have an EPLI policy, your business is not covered against employee lawsuits. According to an industry study, 6 out of 10 non-buyers of EPLI coverage mistakenly think they are protected under other policies.
If you are not carrying an EPLI policy, your business is not alone. A study done by Advisen found that only 23% of companies with fewer than 100 employees purchase EPLI insurance; that number is 34% for companies with 500-700 employee,s and 40% for businesses that employ over 1,000 people.
Employment practices liability insurance provides compensation for losses caused by employee lawsuits. All court costs and legal fees are included in coverage. EPLI insurance protects your business from the following and more:
- Wrongful termination: Statistics show that this is the most common claim brought against employers. According to the EEOC, it is illegal to terminate an employee on the basis of age, race, national origin, gender, or disability. A business can also be sued if they fire an employee for:
- Taking a leave of absence under the Family Medical and Leave Act (FMLA).
- Reporting wrongdoing to the authorities under the Whistleblower Protection Act.
- Harassment: In most harassment cases, the issue is sexual harassment, but cases of violence, bullying and issues based on race, color, age, and religion all fall into this category. The harassers can be senior managers, supervisors, coworkers, agents of the employer, or even non-employees. If the employee can prove the company was aware of the issue and ignored it or did not take adequate steps to solve the problem, the business may face additional fines and penalties if the case makes it to trial. Prevention is the best way to eliminate harassment at your business. It should be clearly communicated to all employees that harassment will not be tolerated.
- Discrimination: Discrimination cases involve employees who are turned down for employment or denied promotions or raises based on age, gender, race, national origin or disability. If an employee can show a trend of discrimination in your business, they may have a winning case on their hands.
- Breach of contract: Violating the terms of an employee’s contract can result in a lawsuit against your company. Proof of damages to the employee due to the breach will often result in a victory for your former employee.
- Emotional distress: If employees feel that your business is fostering a hostile environment, or if they are subjected to overly stressful situations in the workplace, they may sue. While these cases can be very difficult to prove, the legal fees for defending the case can be substantial.
- Other violations: EPLI coverage doesn’t end with these types of claims. It offers protection for suits regarding statute violations, wage and hour violations, wrongful denial of workers’ compensation, loss of consortium, false positives from drug tests, libel and slander.
Also known as professional liability insurance, E&O covers lawsuits that arise from rendering negligent professional services or failing to perform professional duties. This coverage is typically recommended for lawyers, accountants, architects, engineers, IT companies, or any company where individuals provide a service to clients for a fee.
There are a variety of professional liability policies (E&O), each covering a different profession and the risks that they entail.
The policy itself will protect you financially from legal claims and lawsuits up to your selected policy limits in the event you make a mistake and advise or treat someone incorrectly.
There are a couple of different coverage types of professional liability insurance, based on what you do and provide to customers or clients.
- Malpractice insurance is coverage that’s specifically designed for medical professionals such as psychiatrists, podiatrists, and gynecologists. It protects against lawsuits that allege negligence or mistakes. If you work in the healthcare industry, malpractice insurance should be the first policy you obtain.
- Errors and omissions liability insurance is also known as E&O insurance is coverage that’s designed for those who provide advice or services such as lawyers, consultants, insurance agents, and architects. It protects against lawsuits that claim a financial loss occurred based on bad information or negligent advice.
A lawsuit in the professional industry is not unheard of and in fact very common. There are two kinds of professional liability policy coverage types:
- A claims-made policy must be in effect both when the lawsuit is filed and when the incident in the suit took place. This type of policy is the most common, and is usually less expensive.
- An occurrence policy covers any incident that takes place during the coverage period, even if the actual lawsuit is filed after the policy expiration. This type of policy provides more comprehensive coverage and is higher priced.