Depending on the type of coverage you need, your business isn’t always required to carry commercial insurance. But, can you afford not to have it?
In this article, I’ll recap what commercial insurance is and how it works, while focusing on its relevance—and importance—to the safety and security of your business.
Commercial Insurance: Putting the Need into Perspective
According to the Insurance Information Institute, more than seven million small businesses exist in the United States, which could “be wiped out by a disaster or a lawsuit,” whether by another company or after an employee is injured or falls ill on the job.
Think it can’t happen to you? Think again.
Fit Small Business‘s Virginia Hamill reports that 40 percent of businesses will file a commercial insurance claim over ten years. “This means that it’s more than likely that having coverage will pay off at some point during the life of your business,” she emphasizes.
What’s more, Virginia says that 20 percent of these claims are related to burglary and theft, whether by a client, customer, or employee. The good news is that each average theft claim comes in at a relatively low $8,000.
Comparatively, the average cost of a reputational harm claim is $50,000, with vehicle claims coming in a close second at $45,000 each.
Let’s briefly cover how commercial insurance protects businesses against claims like these.
What are the Basics of Commercial Insurance?
Like auto, home, umbrella, flood, or any other type, commercial insurance helps cover costs related to property damage or liability claims. Instead of protecting individuals, though, commercial insurance safeguards businesses against risks like:
- Property damage
- Professional errors and omission (E&O)
- Injured or ill employees, including access to lost wages and rehabilitation programs
If one of these claim types occurs and commercial coverage isn’t in place, the associated costs could drain the business’s resources and cause them to shutter their doors.
Not all commercial policies are created equal, though. Depending on your business’s industry, you’ll likely benefit from coverage tailored to your and your employees’ needs.
How Can Different Types of Commercial Insurance Protect Your Business?
Business Property Insurance
Business property insurance safeguards your business’s physical assets; everything from tools and documents to furniture and inventory. Additional examples include:
- Structures, signage, and landscaping
- Computers and phone systems
- Product transported via land and sea
For example, if an electrical short causes a fire in one of your warehouses, property insurance could help replace lost income, damaged inventory, and repairs to the physical structure.
Business Liability Insurance
Comparatively, commercial general liability (CGL) insurance covers damage caused by negligent work-related acts, whether by you, an employee, or in the ordinary course of business. Coverages include:
- Court costs and legal defenses
However, CGL policies do not cover vehicle-related accidents, punitive damages, or incorrect professional advice.
For example, if one of your employees mis-wires an outlet, which then sparks a fire, the liability portion of your commercial liability insurance could provide coverage to the third-party property he damaged.
Business Income Insurance
Also frequently called business interruption insurance, business income coverage helps support a business if a covered claim decreases its revenue.
Continuing with the example above, if you have to stop or limit shipments to and from your warehouse while it’s undergoing reconstruction, this coverage could help make up for lost income as a direct result.
Business Owners Policies (BOPs)
Most small businesses can benefit from purchasing a business owners policy, otherwise known as a BOP. These roll together liability, property, and income insurance under the same policy, saving you time, money, and potential hassle.
BOPs also allow you to further customize coverage to your business’s specific needs by adding endorsements, including crime insurance, vehicle coverage, flood insurance, equipment breakdown, and cyber and employment practices liability, to name just a few.
If one of your employees was injured in the warehouse fire, workers’ compensation insurance could reimburse them for medical treatment, lost wages, vocational rehabilitation, and death benefits.
Related: Workers’ Compensation 101
Finding Commercial Business Insurance that Meets Your Budget
In general, commercial insurance is relatively inexpensive. Returning to Virginia’s Fit Small Business article, she reports that according to Insureon, the average general liability policy costs $42 per month, but only increases to $53 if property liability is added under a BOP.
However, keep in mind that what you pay for commercial insurance will primarily depend on your business’s industry, its location, annual revenue, and the number of employees.
IHS Insurance Group: Your Source for Business Insurance
Commercial insurance could be surprisingly affordable for your business, especially considering the peace of mind it would provide if a loss occurs—which statistic show is likely to occur within the next ten years.
And although Chubb and Travelers constitute 11 percent of the commercial market, with Liberty Mutual at another 5 percent, there is a wide variety of carriers that can cover your business needs, at a price that won’t break the bank.
That’s where IHS Insurance Group comes in. Our professional staff has decades of combined experience playing a small part in helping businesses like yours succeed!
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