What exactly is “property & casualty” business insurance?
Sometimes referred to as a Business Owner’s Policy (BOP), commercial property & casualty insurance is a general term for several different policies designed to protect a business from financial loss and liability.
Each property & casualty policy is specifically tailored to the specific business that it covers.
Every industry and every market has specific risks and liabilities. In addition, the size of the business, number of employees, number of states it operates in, as well as location (if the business is located in an area with a high risk of flooding or other natural disasters, for example), all play a role in determining the type of coverage that is needed.
What policies are most often used for commercial businesses?
Commercial business insurance covers dozens of risks and liabilities under many different policies.
In general, liability policies include: product liability insurance, malpractice insurance, workers compensation, errors and omissions (E&O) and general liability insurance.
Commercial property insurance includes commercial building and vehicle insurance, loss of income insurance, accounts receivable insurance and equipment breakdown insurance.
Some policies provide specific loss or theft coverage, such as cyber-crime insurance and records retention.
Insurance companies also offer property and casualty packages for specific industries, which are policies tailored to their unique needs and requirements. This includes packages for restaurants, hair salons, dry cleaners, transportation and delivery services and construction.
What is general liability insurance?
Liability insurance protects your business from legal liability. This includes protection from “slip and fall” lawsuits, where a customer gets injured while on your property due to dangerous conditions (such as a wet floor), as well as consumer lawsuits resulting from injuries or damage caused by faulty products or services, otherwise known as product liability coverage.
Liability insurance also protects business owners from lawsuits resulting from professional services rendered by you to your clients.
For instance, this can protect doctors and medical professionals from medical malpractice lawsuits in the event of a patient’s death or injury as a result of an unsuccessful or faulty procedure. This is also known as medical malpractice insurance.
Overall, liability insurance covers you and your employees in the event that someone files a lawsuit against you claiming your business incorrectly performed or failed to perform the services you rendered, resulting in injury or property damage. This could be applied to any service-related industry, such as plumbing, general contracting, medicine or cosmetics.
What is commercial property insurance?
Property insurance coverage covers your business property and assets, which could include commercial buildings, storefront properties, and storage should something unexpected happen.
It also includes things such as machinery, equipment, supplies, and inventory.
Anything tangible that could be lost in the event of a fire or natural disaster that is necessary to the operation your business would potentially be covered under your property insurance policy.
What is workers’ compensation coverage?
Workers’ compensation covers medical expenses and a portion of lost wages for employees who become injured or sick while on the job. Coverage may also include employee physical therapy, mental health and death benefits.
An employee can only receive benefits if their injury relates to their job. Workers’ comp insurance would cover injuries caused by demanding physical labor, dangerous or wet conditions, or being exposed to hazardous chemicals or fumes.
The important thing to keep in mind is that in nearly every state, workers’ compensation is a no-fault system.
What this means is that it doesn’t matter if you or your employer’s carelessness caused the injury, or who is at fault. All that matters is that the injury or sickness arose within the scope of their employment.
If an employee isn’t acting within the scope of their employment and becomes injured, such as riding a motorcycle, workers’ compensation insurance won’t cover them.
What is business interruption coverage?
A business income policy can help pay bills and cover costs if your business has to close temporarily due to a catastrophic event, like a fire. In the event of a disaster that closes your business temporarily, business income coverage would reimburse you for the net income that would have been earned if the event never happened.
This includes things such as rent, payroll and other monthly business expenses.
Also, expenses needed to rebuild and restore operations may be covered as well.
This type of insurance also covers a move to a temporary location if necessary.
Business interruption insurance also may cover other events other than disasters that temporarily close your business. For example, should the local government temporarily close down a street where your storefront business is located, you may be covered, depending on your policy. Some policies also temporarily cover economic or other business related events, such as the loss of a major client or supplier.
What is crime insurance?
As the name implies, crime insurance protects your business from damages resulting from criminal acts. This includes theft, robbery and vandalism.
It also covers crimes that may be committed by your own employees, such as embezzlement, forgery or employee dishonesty that results in economic or property damage.
Cyber-crimes, such as online hacks that result in personal information of clients and customers being compromised, may also be covered.
This is increasingly popular coverage for many businesses, as the release of customers’ personal information has caused some companies untold economic and reputation damage.
What is an umbrella property & liability policy?
An umbrella commercial property policy simply provides the beneficiary with additional coverage above and beyond the original liability limits in the event of a catastrophic loss.
This provides additional financial coverage in the event of a catastrophic loss where damages exceed the liability limits of the original policy.
For example, if there is a natural disaster such as an earthquake which completely destroys not only the commercial building you own, but also all the equipment within it, as well as your entire fleet of vehicles, and the damages exceed the maximum limits of your original policy, you will likely be permanently out of business.
An umbrella policy can give you peace of mind that all your business property is covered even in the absolute worst case scenario.
Umbrella commercial liability similarly provides extra coverage above and beyond your original liability policy in the event of a lawsuit or judgments filed against you as a result of your business activities.
So, for example, if your company is sued for $2 million and found liable for a faulty product that caused a customer to receive medical treatment, but your policy has a liability limit of $1 million, your umbrella policy would potentially cover the additional $1 million.
Considering the stakes, a commercial umbrella insurance policy can be comparably affordable, sometimes only costing as little as a few hundred dollars per year in premiums. However, umbrella insurance isn’t offered as a stand-alone coverage. It is included as one part of your overall commercial business insurance policy.
Do I need business insurance?
Short answer, yes.
If you own or lease a physical business property, own or lease equipment or machinery, you have employees, own or lease vehicles for business use, have customers or clients on your property, or sell any type of service or product that could potentially cause damage or harm if misused or done incorrectly – then you need business insurance.
Otherwise, every single day you expose your business to catastrophic risk that could permanently put you out of business and cause you to be liable for millions of dollars in damages or losses – leading to personal bankruptcy and financial ruin.
Are some policies legally required for my business?
In most instances, Yes. Workers’ compensation insurance is required by law if you plan on having one or more employees.
Some states require certain professional service licensees to carry professional liability insurance, while others require companies to carry disability insurance for their employees.
States typically hand down stiff penalties for employers who do not purchase workers’ compensation insurance.
Every state is different, and has its own unique set of workers’ compensation laws that employers must follow, so be sure to check all the legal requirements and regulations of your state before starting a business.
How much does commercial property & casualty insurance cost?
The cost entirely depends on the industry, market, location and size of the business. A small, home-based business can often be sufficiently insured for just a few hundred dollars per year, while large, public corporations can spend millions protecting their assets and their future.
Your policy premiums are determined by the anticipated cost of losses. The insurance company makes a good-faith estimate of how much they will need to pay out in the future for losses on the type of policy you have to determine the cost of your premium, so they will closely examine every factor of your business in doing so.
This includes determining factors such as whether your business is located in a high crime area, an area at elevated risk of a natural disaster, or an area experiencing high unemployment.
Workers’ compensation insurance pricing is based on a number of factors, including the number of employees you have, the type of work they do (IE how dangerous it is) and the industry and market you operate in. The higher the risk involved in running your business, the higher the premium.
How do I make a claim?
Before your business suffers a loss or damage, you should have an insurance agent personally assigned to you. This will be the first call you make in the event you need to file a claim.
Your insurance professional will take down all the information you provide about the incident, including your statement.
The insurance company will then assign an adjuster to review the details of the claim and to determine whether the loss is covered under your policy.
Your agent should be your personal representative through the entire process – from claim to payment. The agent’s primary goal should be to ensure that the claim is processed as quickly and seamlessly as possible, understanding that the most important objective is to minimize the effect of the damage or loss will have on your ability to continue to run your business.
I have a home-based business, do I still need property & casualty insurance?
This is a tricky question, and the answer is a solid “it depends.”
Many personal homeowners’ policies outright prohibit use of the home for business use, and will not cover any equipment or supplies used for business within the home.
This includes all physical files, computers, phone lines, shipping boxes and any and all inventory.
If you primarily work out of your home office, and provide a service or product, or have customers or clients visit your home for any reason, you probably need commercial property and casualty insurance.
Do I need commercial auto coverage if I use my personal vehicle for business?
In most cases, personal auto insurance policies will not cover losses or damages sustained when the vehicle is being used for business purposes, even if it is your personal vehicle.
So it makes sense to make sure you have coverage for your vehicle while conducting business.
This includes if you drive for a rideshare company like Uber or Lyft, make deliveries or simply visit your clients as a salesperson, such as a real estate agent.
Having commercial auto coverage will also cover you in case any of your employees use your vehicle and get into an accident as well.
How do I get commercial insurance coverage?
Much like insurance policies to cover your personal home and vehicle, you may begin the process by contacting an insurance company professionals like us. We have many trained, expert agents who have experience with nearly every type of company and market.
Simply talk to us about your business, including things such as the location, number of employees and products or services involved.
Be forthright and honest about your business, and don’t be afraid to ask questions – that is what the agent is there for.
That way, your agent will be able to examine all aspects and potential risks involved with your business, and provide you with several coverage options to help find the right policy for you.
Now It’s Your Turn
I hope You Understanding Property and Casualty Insurance: 15 Common Questions by Business Owners
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