In this article, we will see why Commercial Insurance also referred to as Business Insurance is a “must have” for businesses and business owners.

We live in a business-oriented world where we must exchange goods and services with each other for a reward, usually monetary payment. In order for some business entities to be able to provide effective services or products, they need to employ a host of workers that will manage the company’s customers and properties. Anything can go wrong in such a situation and at any time. 

An employee who works in a construction firm could sustain injuries while working on a building site, a fire could gut the company’s building, basically, anything can go wrong. It’s the responsibility of business organizations to prepare for the risks of running business activities and thus the importance of commercial insurance.

Small business owners, for example, want to reduce the burden of risks to the barest minimum because they do not want to spend the little profit the business makes on lawsuits or replacing an expensive damaged property. This might hinder the eventual growth of the company. Commercial insurance can help prevent this from happening. 


What is commercial insurance?

Just like every other type of insurance policy, commercial insurance, which can also be referred to as business insurance, is aimed at providing financial coverage to its policyholders in the eventuality of the unforeseen happening in exchange for premium payment.

Commercial Insurance policies are designed to protect businesses from the financial burdens that might emanate from theft, lawsuits against the company, property damages and injuries to employees. 

Due to the fact that businesses differ according to the industry they operate in, commercial insurance policies are tailored to suit each industry’s style of operation. Policyholders have the option to increase what the insurance plan covers. Unlike personal insurance policies like home insurance, commercial insurance can provide coverage to a sizeable amount of employees and company owners.  


Commercial insurance terms you should understand before getting a policy

While dealing with your insurer or insurance broker they could use terms that you do not understand either in the insurance contract paperwork or while speaking to them. It is important to know and understand these terms so as not to be lost when you see or hear them.

  • Premium: This is a common factor in every type of insurance policy. A commercial insurance premium is what businesses pay for the insurance company to give them financial coverage when the unexpected happens. The number of employees, type of business, the location of the business, the risk level of the business, age of business and employee payroll can all affect the price of your commercial insurance premium. 
  • Policy limits or limit of liability: This is the total amount of money the insurance company will pay to cover all of a policyholder’s losses. Per-occurrence limit and aggregate limit are the two factors that determine commercial insurance policy limits.


  • Per-occurrence limit- this is the total amount of money an insurer pays per claim. 
  • Aggregate limit- this is the total amount of money an insurer will pay for all claims and for the duration of time the insurance policy contract will last. A number of insurance companies set their policy limits at $1million.


  • Deductibles: This is the total amount of money the insured company must pay before the insurance company will provide funds for a claim settlement. 
  • Coverage and exclusions: This is divided into two parts, the Coverage part and the exclusion part. It simply refers to the number of risks your policy covers (coverage) and those it doesn’t cover (exclusion).
    This is a very important factor of your insurance policy contract because it helps you know exactly what kind of commercial insurance you are paying for and what it can cover should you need it to work for you.


How does commercial insurance work?

When a commercial insurance policyholder makes a claim or a liability claim is made against them, their commercial insurance provider takes care of financial losses caused by theft or property damage, lawsuit fees and compensations of the third party.

In a case where, for example, there was a robbery in a bank and the robbers damaged all the bill counters in the process the insurance company will conduct an investigation if a claim is made. If everything adds up the insurance company will replace the bill counters and any other damaged item.

In a liable case the insurance company might settle the third party outside court or take over the company’s court defence and if the company is found guilty the insurer will pay both the company’s and plaintiff’s lawyer fee, court fee and compensations to the affected third party as agreed in court. 

Of course, all these will be possible only if your premium and deductibles are paid.


Types of commercial insurance

There are different specifically tailored commercial insurance plans designed to suit specific types of business. Here are a few of them.


General liability insurance

This kind of insurance financially covers a company when their action or inaction leads to a client suffering injury or the property damage of a random person that doesn’t work with the company.


Commercial auto insurance

Companies that require vehicles to run their business are advised to get this type of insurance. When a company’s vehicle is involved in an accident or develops a fault, commercial insurance will take care of the settlement bills for the company and the third party if the policyholder is found guilty of causing the accident.


Worker’s compensation insurance

Every business requires workers to be able to function and these workers could be involved in accidents caused by your company. It would be wise for businesses to get worker’s compensation insurance so as to protect the company, financially, when injured employees sue. It covers both medical and lawsuit bills for the company but to an extent that the company’s policy covers.


Cyber liability insurance

Due to new trends, most companies rely on a lot of data to run their business. Some of this data include customers’ information and other delicate company information. The company’s database can be breached at any time and for any reason. This would definitely destabilize the flow of business in such a company. Cyber liability insurance helps cushion a company financially at times like this.    

Business owner’s policy

This type of insurance policy is designed for small and medium scale businesses because it offers a blend of different insurance plans in one so as to cut costs for the policyholder. It usually covers property insurance, general liability, crime and inland marine insurance.


Errors and omissions insurance

Errors and omissions insurance protects a business that’s charged to court and found guilty for causing harm or financial loss to a client due to negligence or ill given advice. The insurance provider of this kind of policy covers the court costs and compensations when necessary.  


Fidelity bonds

When a company employee steals from its clients in the company name, the company is at risk of also getting charged to court and forced to pay for damage claims if the stealing worker is caught. Fidelity bond protect companies in situations like this.


Business interruption insurance

When there is an accident in a company that forces the business to stop, that company will definitely lose money during the period when the damages caused by the accident are being fixed. Business interruption insurance is your best protection for this period.


With all this information, you are well-educated on what type of insurance to take for your company. 


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