Having the right commercial insurance coverage in place is one of the most important factors in the success and financial stability of your business. When it comes to risk management, it is a vital way to protect you, your company, and your employees from the unexpected costs of damages, injuries, lawsuits or temporary closures.
Depending on the size of your business, a simple mistake or a single legal claim against you could be devastating. Court costs and settlement expenses could drain enough of your resources that you may never be able to recover.
Building a business takes a lot of hard work, and you can protect your investment with a commercial insurance package that is tailored to your specific needs. It is important that your policy include certain areas pertinent to your company so that you know you are covered in every situation. It could mean the difference between “business as usual” or having to shut your doors permanently.
Areas of Commercial Insurance Coverage
Most commercial insurance policies will focus on three main categories:
- Commercial Property Insurance
- Commercial Liability Insurance
- Business Interruption Insurance
Since each business or company is unique, the particulars may vary. All policies are not created equal, so it is important that you read everything carefully and be aware of exactly what is included or omitted. Consider your particular business and the potential areas of risk, and then make sure that you have the coverage in place to protect you should any problems arise.
Commercial Property Insurance. This coverage will protect your company’s physical assets in case of theft, fire/smoke, water/flood, vandalism, or loss incurred by any other means except negligence or intentional damage. Damage or injury committed with an “intent to harm” may be viewed as malicious behavior and the insurance company has the right to deny your claim.
On-Site Property: This covers the actual place of business including office equipment, furniture, computers and electronics, machinery, customer property, and inventory.
Off-Site Property: If your company provides a service such as electrical, plumbing, or mechanical roadside assistance then you may have a lot of tools and equipment that are off premises. You will want to make sure that these assets are protected even when they are not at your company’s physical address.
Delivery companies often charge huge fees for insurance on goods-in-transit, so if you ship a lot of products, you may want to include coverage in your policy to ensure that they are protected while enroute to the customer. You may find that the extra premium is far less than paying freight or shipping companies for each delivery separately.
On-Site Services: If you own a business that requires customers or clients to spend time on-site such as a restaurant, dance studio, day care center, or exercise gym, then you will want to have certain “extras” added in your policy. Things like speciality flooring for dance classes, fixtures and lighting, signage, fencing for outdoor playgrounds, or landscaping may not necessarily be included unless you request their addition.
Employee Theft: If you have employees working with valuable tools and machinery or handling money on a regular basis, you should probably add protection against employee theft or fraud.
Commercial Liability Insurance
Commercial General Liability Insurance is the most common type of commercial insurance and protects your company if any lawsuits are filed against you or one of your employees.
While basic policies cover injuries to customers, clients, or suppliers on-site, you may also want to extend the coverage to include any injury or damage that may be caused off premises. If you are a manufacturing or assembling company, you can also add coverage to protect you if a customer is harmed using your products.
The main areas of focus for this type of insurance include:
Bodily Injury: This coverage applies if you, your company, your product or service, or one of your employees is held responsible for any physical harm( including injury, sickness, or death) to a client or customer. The insurance may pay medical costs, loss of income, or most other types compensation ordered by the court.
Property Damage: If your business provides an off-site service, your policy should include coverage in the case that you, or one of your employees, causes damage to another person’s property.
Medical Payments: Your policy should provide protection that covers the medical expenses, funeral costs, or specialized equipment needs resulting from an accident or injury that happened on your premises or as a result of your company’s actions.
Personal Injury: This applies if a client or customer claims that your company caused damage to their reputation or character, or affected their position within the community or workplace. If you, or one of your employees writes or verbalizes anything that may libel or slander another person, if there is a violation of privacy rights, or if wrongful actions are committed, your insurance company would pay most judgements or settlements ordered by the courts.
Legal Expenses: Legal costs alone can destroy your business, so make sure that your policy includes coverage for all possible expenses such as:
- court costs
- lawyer fees
- investigation fees
- witness fees
- police report costs
- loss of income while you are appearing in court
- judgements or settlements plus interest charged or accrued
- any bonds required by the court
If you manufacture products, consider adding product liability to your policy. Also, if you provide a professional service such as medical or legal, then a professional liability policy – also known as Errors and Omissions Insurance – should be added to your portfolio.
In some states, Worker’s Compensation insurance is required; however, if you live in an area where this is not mandatory, it is recommended that you include this in your policy so you are protected in the event that an employee is injured while on the job.
It is important to note that liability coverage, like property insurance, applies to accidental or “unintentional” actions only. Intentional behavior with the purpose of causing harm to another person’s property, reputation, or physical body will likely mean that your claim will be denied.
Business Interruption Insurance
While property insurance covers most physical damage or loss of assets, business interruption coverage applies to the profits that could have been earned if your business had been able to continue running as usual. There are five areas that you should consider including in your policy:
- Loss of Profits: Insurance companies will typically look at the financial statements from previous months and issue your payments based on what you would have earned under normal circumstances.
- Fixed Costs: This covers operating expenses that you will have to continue paying in relation to the property such as mortgage, insurance, property taxes, or utility bills.
- Temporary Location: The cost of renting temporary property can be high, especially if you have to move a lot of equipment or inventory. Depending on the type of business, you may want to ensure that these expenses will be covered.
- Extra Operating Costs: This would provide coverage if you have to pay extra utilities, have temporary internet set up at a new location, spend more money getting supplies to and from work sites, or other extra operating costs incurred while you are waiting for repairs to be made.
- Income Shortfalls: Some policies include coverage to supplement income for a period of time following reopening while you are re-establishing your business. Depending on the type of business or the market in your area, this coverage may be very beneficial.
All it takes is one mistake, one accident, one moment of negligence, or one irresponsible employee and you could be facing expensive lawsuits that threaten to destroy your business. If you own a company – no matter how big or how small – you should make sure that you have the protection of an insurance policy that covers all unexpected events that could potentially hurt your future success. Commercial insurance coverage can be customized to fit the needs of your particular company so you know that, when problems arise, you will have the financial resources necessary to keep operating.