Commercial Insurance – Cost and Types of Policies

Commercial insurance is a necessary form of business coverage, and here’s why!

There is absolutely no way to predict the future. It is one of the main reasons the insurance industry thrives today, collecting billions of dollars every year in premiums.

When you are managing a business, for it to run smoothly without getting into unforeseen legal and financial trouble means you must cater for every possibility.

But with any business, big or small, issues are unpredictable and can prove costly if you do not have commercial insurance.

Commercial Insurance – Cost and Types of Policies

It is also a good idea to educate yourself by reading a commercial insurance guide to precisely know the type of policy you need for your business.

What Exactly is Commercial Insurance?

Just as the name suggests, commercial insurance is an umbrella term for a group of insurance products aimed at commercial enterprises.

The term “commercial enterprises” includes self-employed individuals, companies, and any other businesses.

Commercial insurance is not to be confused with personal liability insurance, as it is geared more towards the needs of businesses rather than individuals.

Most if not all businesses in the United States must have some degree of insurance cover to protect both clients and employees.

This insurance can cover several different aspects, depending on the type of policy you select.

But most, if not all, policies do cover any injury or damage to third parties, including personal and property.

What is the Difference Between Commercial and Business Insurance Cover?

The terms” commercial insurance” and “business insurance” are often used interchangeably, but few aspects set the two apart.

For example, while commercial and business insurance both provide auto insurance, commercial insurance covers vehicles used for “commercial” purposes such as transporting goods or persons to a location, delivery drivers, etc.

The main feature is that these vehicles are generally used in the process of generating income.

On the other hand, business auto insurance will cover vehicles used in your company’s day-to-day operation, such as sales representatives meeting their clients at their homes, or carrying samples with them.

Different Types of Commercial Insurance

There are many different types of commercial insurance to choose from, most notably:

General Liability Insurance

There is a significant risk of liability in any business activity in case of injury or damage to third parties.

Therefore businesses of all sizes need some form of general liability insurance.

In addition, if you are selling products online or collecting customer data through your business website, you should also have e-commerce insurance over and above commercial general liability insurance.

General liability insurance is the most fundamental and necessary type of cover for any business that deals in any way with the public.

It safeguards your business should you find yourself in a jam.

Although this form of insurance coverage is highly specialized, it does cover you for a wide range of possible damages or injuries caused to third parties stemming from your business activities.

In the event of a lawsuit, general liability commercial insurance will cover most if not all costs relating to it.

But since general liability insurance, as mentioned earlier, is an essential cover that all businesses should have, you should ideally look into add-ons for more coverage.

It is especially the case if you are rendering specialized services such as dog walking, are pet sitting or are engaged in roofing installation or repairs.

The cost of commercial general liability insurance is anywhere between $350 to $1550 or more per year, depending on the type of business you operate, the number of employees, and the state where you render your services.

Apart from legal costs, general liability insurance also covers potential medical costs in the event of physical injury to a third party.

Some policies can also cover advertising injury to third parties.

Commercial Property Insurance

Commercial insurance covering real estate is a major, and perhaps even the most important, aspect of commercial insurance.

Basically, it pays for losses and damages incurred to business property, whether leased or owned.

As a business, you may have multiple pieces of equipment, furniture, etc., in your office.

The policy would cover computers, copiers, fax machines, air conditioners, and basic furniture like chairs, tables, reception couches, and so on.

Damage or theft of any of these essential things can cost you a substantial amount, which is where your policy step in.

Such damage may have been caused by natural disasters like earthquakes or floods, or accidentally because of the actions of one of your employees.

The cost of commercial insurance on real estate will depend on several factors, such as the property’s location, which influences whether it is prone to natural calamities.

Usually, a check is also made on the construction of the property to ensure that it is made from fireproof materials and so on and the level of occupancy.

There are several additional coverages to choose from for commercial property insurance, such as:

Equipment breakdown insurance

this type of insurance covers your business against damage to boilers, machinery, and other types of equipment.

For example, if a fire in your office has caused damage to the computers, boiler, or any other items, machinery insurance will cover the replacement costs.

Please note that to ensure coverage of the items in your office, you must keep either your agent/broker or your insurance provider updated on the contents you have in your office.

Builder’s risk insurance

If your office building is still under construction, then opting for builder’s insurance is a wise move.

This type of commercial property insurance covers costs related to damage to the building while under construction, such as that due to an earthquake or storm.

Debris removal insurance

if your business has suffered damage caused by a fire, flood, windstorm, etc., commercial property debris removal insurance will pay for removing any debris that is left behind after its aftermath.

Business interruption insurance

Natural disasters can happen anywhere and anytime and can cause severe damage to your business property.

As a result of such damage, your business property may need to be restored and rebuilt, as a consequence of which you may have to shut your doors temporarily.

Business interruption insurance is geared towards compensating you if this happens, so you can still stay viable in this competitive business marketplace.

Ordinance or law insurance

ordinance refers to when your business does not adhere to building codes any longer due to external circumstances.

Say, for example, you have a 5-story business property that is 50 years of age, and an earthquake lightly damages the first three floors.

Because local ordinance codes require the demolition of 5-story buildings damaged by the quake, you may now be forced to demolish your building completely and rebuild according to current regulatory building codes.

Tenants’ insurance

if you lease a space for your business, then it is usual that the landlord insures the building, but that is only for the property and not the contents inside.

Here is where commercial tenant’s insurance becomes extremely valuable as it will pay for damages to your equipment, stock and anything else in the office.

Worker’s Compensation insurance

In most states, it is mandatory to have worker’s compensation insurance if a business has one or more employees.

Worker’s compensation insurance covers you against the costs the arise if any employees experience an injury while on the job.

Even if your state does not mandate it, it is crucial that you consider worker’s compensation insurance, as it will protect you and your employees and lead to a healthy work environment.

Commercial Auto insurance

Commercial vehicles are more susceptible to accidents than private vehicles because they are being used for far more extended periods each day, and driven by a broader range of drivers.

Even the slightest damage to a vehicle can cost hundreds of dollars to fix, which is covered under a commercial auto insurance policy.

Commercial auto insurance also covers you in case of theft, highjacking or arson of your company’s vehicles, allowing faster replacement of necessary vehicles, without which your company’s day-to-day operations may be adversely affected.

What is the Cost of Commercial Insurance?

The cost of commercial insurance varies and depends mainly on the type of business you operate.

Another influencing factor is whether the policy is marketed offline or online.

Further, the cost of commercial insurance also depends on the coverage limit you opt for, where the higher the number, the higher the cost of your insurance premiums.

Insurance companies take a look at several factors when determining the cost of a commercial insurance policy, including coverage types and limits, claims history, location, number of employees, etc.

But to give you a rough idea, the average cost of a comprehensive policy across eight industries was approximately $1500 per year for a medium-sized business.

However, since no two companies are entirely alike, where each has its own particular business needs, it is essential to understand that the policy cost could be significantly lower or higher than the industry average.

How to Determine the Commercial Insurance Coverage You Need?

Before signing for the policy, you have to decide the coverage limit you need.

This can get a bit tricky because several factors come into play, including the things you would like coverage for and the add-on coverages you need.

Adding to this, the two factors that will determine the cost of commercial are occurrence limit and aggregate limit.

To explain briefly, the occurrence limit is the amount of money your insurance company will pay out per individual claim.

In contrast, the aggregate limit is the maximum amount your insurance company will pay out for the entire insured period.

In both cases, the higher the limit, the more you can expect to pay in commercial insurance premiums.

Again, your coverage limit will not be the same as other businesses, which is why it is best to speak to your insurance agent for the best advice.

Final Thoughts:

Commercial insurance is a must-have for businesses big and small, and it protects your company from landing in a financial bind.

It covers several different things, most importantly damages or injury to third parties and property.