Commercial insurance can be extremely complicated and will likely require consultation with an independent agent who can evaluate your needs.
We are typically dealing with our livelihood when it comes to commercial insurance, as your financial well being may hang in the balance of having adequate coverage.
If you’re a savvy consumer, you know to shop around for commercial insurance, but it’s important not to skimp when it comes to coverage for any commercial venture.
What Types of Commercial Insurance Coverage Are Available?
The list is too long to study in detail, but here are the basic types of commercial insurance available to you and a brief explanation of what each covers.
Each of the following commercial insurance coverage types listed below may be purchased separately or together, which is known as a commercial package policy, or CPP. A commercial package policy contains liability coverage and at least one type of property coverage.
Commercial General Liability (CGL): Regardless of the type of business you own, you are susceptible to liability claims. This type of commercial insurance policy is designed to cover you for this liability.
For example, if you own a convenience store, you are liable for bodily injury and property damage that results from your negligence. If a customer were to slip and fall on a patch of ice in your parking lot because you didn’t properly remove it (apply salt for example), you would be liable for their injuries. The Premises and Operations portion of your CGL policy would provide coverage in this instance.
You may be found liable for bodily injury or property damage even if you don’t have a particular location where customers may shop. A general contractor who works on a location for their client would need a CGL policy to cover their Products and Completed Operations. Perhaps you install a ceiling fan for a client and the ceiling fan comes loose and injures the person by falling on them. You would likely be sued for damages. This is where your CGL policy comes into effect.
Finally, you may be held liable for copyright infringement by accidentally using another company’s logo or “catch phrase” in an advertisement you produce and distribute. The Personal and Advertising Injury portion of your CGL would provide coverage if you were to be sued.
Commercial Property Insurance
Almost every company needs property insurance. You may be insuring a commercial building or your business’s personal property. You may also need to insure the property of others. Perhaps you own an office suite where employees leave their belongings when they are not working. This type of policy is somewhat similar to a personal lines property policy in “how” it covers you.
You may choose to purchase an actual cash value or replacement cost policy when it comes to your building or other property. Read more about the difference between an actual cash value and replacement cost policy.
Commercial Crime Insurance
People steal from companies in various manners. Commercial crime insurance is designed to indemnify the insured against this occurrence. Let’s take a look at the types of crime insurance available to you.
Robbery: The taking of property using the threat of bodily harm. Picture a convenience store clerk being held up for the money in the register.
Burglary: Often confused with robbery, this is when someone unlawfully enters a building to take property. There has to be evidence of forcible exit or entry to the premises for this coverage to be triggered.
Safe Burglary: Same as burglary, only involving a vault or safe.
Theft: This is any type of stealing. Theft includes burglary or robbery, but the circumstances of the taking of property are not specifically defined here in the manner they are for robbery and burglary.
Extortion: In CSI: Miami fashion, this is when you threaten to harm an individual being held captive in order to get money or property from an individual who has any sort of relationship with the person being held captive.
Commercial Auto Insurance
Any time a vehicle is used in a commercial fashion you must purchase commercial auto insurance. The coverage and limits are similar to personal auto policies with a few additional options.
This is different coverage from “business use” on a personal lines policy, which is designed to cover incidental vehicle use. For example, a Realtor may require only a “business use” policy to drive from location to location in a personal auto to show homes.
You may purchase coverage for vehicles hired and non-owned by your company for use in your business. For example, if you own a flower delivery company and your delivery truck breaks down you will likely need to rent a replacement vehicle until yours is repaired. You will also need the “hired” car insurance in case you caused an accident in the rented vehicle.
You may also opt to purchase “non-owned” coverage which would be necessary in the event your employees use their vehicle in the day to day operations of your company. You or your company would be held liable for damages even if your employee caused an auto accident while using their own vehicle to pick up pizza for an office lunch since thevehicle was used for “work purposes.”
Think this is ridiculous? Do you think the injured party’s attorney is going after the employee’s insurance or yours…always follow the money!
Commercial Inland Marine Insurance
“Inland” or “ocean” marine coverage is designed to insure business personal property that can be moved or transported to a different location for use. This type of commercial insurance requires different coverage than property at only one location because it is subject to additional causes of loss. There are far too many types of inland and ocean marine coverage types to list here.
Ultimately, there are six general types of risks insured under this coverage type:
1. Commercial Property Floater: The term “floater” implies the property is not in the same location at all times.
2. Transportation or Communication: Power lines and cell phone towers would fall into this category.
3. Personal Property Floater
6. Domestic Shipments
Fast Fact: “Ocean Marine” was the first type of insurance available. Cargo shipments were insured because of the high risk of loss while traveling via water. The phrase “Inland Marine” was coined simply as a way to describe insurance when it was first used for non-water travel purposes.
Equipment Breakdown Insurance
Many other forms of commercial insurance specifically exclude coverage for this type of risk. Equipment breakdown coverage is also known as Boiler and Machinery coverage.
There are several types of unique losses that arise from the use of large machinery covered specifically by this type of policy.
For example, if machinery breaks down, you may be out of business until it is back online. The expenses to fix the equipment quickly are covered here. Worse yet, a large enough piece of equipment may cause serious damage to property…picture an explosion in a factory.
Another example may be a warehouse freezer breaking down. Not only would you have to repair the freezer, but you would be subject to financial loss for the inventory that is no longer being kept at the proper temperature.
Farm insurance is unique in that it often covers both personal insurance and business insurance. Many farms have personal residences and personal property at the same location as heavy machinery as well as livestock. All of which are subject to financial loss by different means.
There are four potential coverage parts to a farm insurance policy, which similarl to the regular commercial property package, may be purchased individually or as a farm package policy. Let’s take a look at them:
1. Farm Liability: this is very similar to the commercial general liability policy for our purposes.
2. Farm Property: This can range from the dwelling a family may live in to barns or silos on the property.
3. Livestock: Of course, you need to insure the animals on the property as they represent various forms of income for a farm.
4. Mobile Machinery and Equipment: You cannot insure a tractor on a standard commercial or personal auto policy. This is the part of the farm policy that covers this risk. If you purchased a farm property policy, this policy is not necessary.
We have barely scratched the surface on commercial insurance within this article. As discussed, it is highly recommended you seek the assistance of an independent insurance agent to help you navigate your commercial insurance needs.