Commercial insurance is insurance taken by business owners to ensure the smooth functioning of their business without worrying much about the risks that may threaten their business. Almost all businessmen take commercial insurance as per their needs and prepare themselves for an untoward incident like theft, fire, accident, customer or employee injury or maybe a legal battle. Multiple employees can also be covered by commercial insurance.
Insurance agents are trained in such a way that they can explain the perfect type of policy that would meet the needs of a businessman, considering the number of risks and threats each business faces.
Plans and policies are often structured and customised to meet the requirements of the business owners who will be purchasing them. While structuring the policy, the day to day activities and business models are considered.
Key Takeaways
- Commercial Liability is meant to ensure the smooth functioning of the business despite unexpected occurrences.
- There are various types of commercial insurance that cover different types of businesses.
- Commercial auto insurance is meant explicitly for commercial vehicles.
Different types of commercial insurance
There are many types of commercial insurance. Some of the common ones are as follows.
Property Insurance
This is one of the most commonly used commercial insurance. Any sort of damage to the commercial property like fire, theft, natural calamity, man-made calamity like riots, vandalism etc., is covered in this type of policy.
General liability insurance
This commercial insurance policy is required for leases and contracts. This insurance plan covers the customers against injury and property damage. In large multinational organisations, it covers infrastructure damage, product liability, workers’ compensation etc.
Shopkeepers Insurance
This commercial insurance covers any damage to the shop and its promises, such as theft, fire, goods kept in the shop, personal accident etc.
Commercial auto and equipment breakdown insurance
These commercial insurance policies are for businesses relying on tools and automobiles. Equipment breakdown insurance can be helpful to protect not only these tools but also pieces of equipment like computers, machinery and its parts, etc.
Engineering Insurance
This commercial insurance policy is for engineering and construction coverage. It also extends to heavy machinery, power plants, electronic equipment, transportation systems etc.
Marine Insurance
Such commercial insurance policies are for industries that cover marine cargo risks and risk of damage due to natural calamities like tsunamis, floods, etc.
Aviation Insurance
Apart from this, some other types of Commercial Insurance are:
This commercial insurance covers all types of aircraft or private jets. The crew of the aircraft is also covered in this policy. It also covers damages to tools, equipment or supplies of the company.
- Bankers’ indemnity insurance
- Packages and business owners’ policy insurance
- Business interruption insurance
- Petrol pump insurance
- Restaurant insurance
- Professional liability insurance
How much does commercial business cost?
The cost of commercial business is different for everyone. It varies depending upon the amount of risk associated with your work and what sort of coverage you need for your business. An insurance agent or broker will take the following factors into consideration while evaluating your premium. These factors are as follows:
- Type of business you own
- Gross annual revenue
- Location of your business
- How old is your business
- Whether you own commercial property
- Whether you own a commercial vehicle
- Number of employees in your office
- Training procedures for employees
How does Commercial Insurance work
- Once the policy is suggested to the business owners, they select a plan that suits their needs.
- Then, the premium is decided based on the add-ons and specifications the business owners want to protect their business against.
- Once the premium amount is finalised, then the deductibles are calculated.
Deductibles are the amount of money payable by the business owners to the insurance company before the claim is disbursed. In case you are paying less for your insurance policy on a monthly basis, the deductible will be on the higher side.
- A cap is set on the policy limits, which is the maximum the insurance company will give on a given claim or over the term of the policy. The policy will only pay up to a certain limit, even if your deductibles are met.
- When you take a policy, the exclusions are always clearly mentioned.
Words to remember
Exclusions are the specific circumstances or incidents that the insurance policy does not cover.
Let’s understand how a commercial policy works with the help of an example.
Suppose your staff fails to put out a warning that the floor is wet. A customer walks in and slips on the wet floor, breaking their hand. At the same time, the tile of the floor is broken, and some products that were on display are also damaged. The angry customer punches the staff and breaks his nose. A legal battle then begins between the customer and your business.
Here, general liability insurance will protect your business against legal expenses as well as any compensation that you may have to give to the customer, like paying their medical expenses.
Since your staff was injured in the process, you will have to pay his medical expenses as well. Since you have workers’ compensation insurance, these expenses will be covered. Commercial property insurance will help you recover the expenses of fixing the tile and replacing the product.
If your commercial vehicle was involved in a road accident with a third party while delivering the goods, the commercial auto insurance would cover the compensation required to be paid to the third party for the injuries they sustained, repairs to their damaged vehicle, repairs for your damaged commercial vehicle, injuries that the commercial vehicle driver sustained and any damage to the material that was being transported.
Pros and Cons of Commercial Insurance
Pros of commercial insurance.
- Commercial insurance protects businesses against losses and damages caused by natural calamities.
- Workers’ compensation safeguards the employee at work and protects them from illness and injury.
- Commercial Insurance protects against unforeseen events that could interrupt the business. With insurance, the normal functioning of the business is not hampered as quick recovery is achieved.
- Insurance premiums are deductible expenses for tax purposes.
Cons of commercial insurance.
- Companies may have to take too many insurance policies to protect themselves against different risks.
- Many claims take a long time to process.
- Insurance premiums could turn out to be expensive for the business owner.
It is imperative to assess the risks that your business could be exposed to and the ones that could hamper the normal functioning of the business before choosing a commercial insurance plan. The primary objective of commercial insurance is to reduce the unexpected liability that a business may encounter.
Frequently Asked Questions (FAQs)
Marine and Aviation insurance provides global coverage and includes imported or exported goods.
A business owner’s policy (BOP)is a combination of different insurance covers meant to provide a customised insurance policy to the business owners and eliminate the need to get multiple insurance policies.
In the event of a natural disaster or a fire, the business may have to remain shut for a few days, which affects the revenue. Some commercial insurance policies like the business interruption policy provide protection against loss of income and compensate the business for the revenue loss as a result of specific incidents covered.
It is natural to make some mistakes, even for professionals. Professional Liability insurance protects against human errors and omissions that occur while conducting the business. Any negligence that could happen from employees of a business because of which the client suffers can be covered under professional liability insurance. It covers legal expenses and any compensation/settlement that needs to be paid to the client.
