In this guide to Commercial Insurance Programs, you will find details on the usual types of business insurance policies found in them.
The Small Business Association (SBA) counts nearly 32 million small businesses in the US. Of those, 81 percent, or 26 million, are considered "nonemployers" because they have no employees. The remaining 19 percent represents 6 million small businesses that have paid employees. The SBA estimates roughly 20,000 large companies with more than 500 employees in the US.
What is Commercial Insurance & Who Needs It?
Virtually all businesses, large and small, need commercial insurance protection. Commercial insurance shields its insureds from the unexpected costs of running a business. Accidents, natural disasters, and lawsuits can ruin a company without the proper coverage.
If you have a payroll, you have peril. However, depending on business practices and activities, many solo entrepreneurs may also need commercial liability insurance and other forms of protection.
Business owners insure their longevity and assets – business and personal – against substantial and potentially crippling losses due to unforeseen events and catastrophes. And many companies need to purchase extra insurance to comply with state laws. However, since state laws regarding required insurance coverage differ, it's wise to determine the commercial insurance coverages needed by each state where your clients operate.
Types of Commercial Insurance
Small businesses and large businesses have similar basic needs. The following coverages for liability, property, and Workers' Compensation are found in nearly all commercial insurance programs. Most small businesses use a Business Owners Policy (BOP) as the basis of their insurance protection.
A business owner's policy (BOP) bundles commercial insurance policies into a single package. A typical BOP combines General Liability, Property Damage, Business Interruption (BI), Equipment Breakdown, and sometimes other coverages. Simplifying and combining the policies helps to lower the premium. A description of pertinent commercial Insurance coverages is below.
While many small businesses are candidates to buy a BOP if the business meets specific requirements, for example, underwriters must consider the business a low-risk operation. They only insure businesses with fewer than 100 employees that operate in a small office or compact, safe workplace environment, earn less than $1 million annually, and require less than 12 months of continuous BI coverage.
Larger-sized businesses have more complex needs a BOP cannot address, and the following list of coverages found in most Commercial Insurance Programs applies to businesses of all sizes.
General liability insurance is known as Commercial General Liability (CGL) when sold as standalone coverage outside a BOP. General liability insurance helps to pay claims against the business for bodily injury or property damage to others who are not employees. For example, an everyday liability claim occurs when a visitor to the business's premises is injured in a slip and fall accident. The policy will provide payment for their medical expenses.
Property damage pays to repair or replace accidental third-party property damage caused by the business or its employees to a customer's property or other persons. It also helps pay legal fees and settlement costs for advertising or personal injury claims against the business for libel, slander, and copyright infringement.
Product liability is an endorsement or separate policy to a BOP or CGL that protects businesses against risks of bodily injury or property damage claims caused by their products away from their business location. Any company that manufactures, distributes, or sells products is at risk of lawsuits claiming harm to people or property from its products.
Commercial Property Insurance
Commercial property insurance compensates losses to a business's insured assets due to fire, theft, or other covered natural disasters or events. The coverage protects against property damage to buildings, structures, and the business's equipment in its operations. In addition to the damage to property, it also helps to pay to replace a business's stolen property for building owners and renters.
Commercial auto insurance is like personal auto insurance. It is necessary because company-owned vehicles are excluded from personal auto, requiring commercial auto insurance instead. A business auto policy, as commercial auto is also known, provides liability, collision, and comprehensive insurance for business vehicles. Collision pays expenses to other drivers for repairs and medical expenses. Comprehensive helps cover vehicle repairs or medical costs to owners and employees when they get into an accident.
Besides covering company cars in use by a business, commercial auto can also cover many other vehicles with specific uses for the business. Some examples include delivery vans and trucks, dedicated use vehicles such as forklifts, bobcats, service and utility trucks, food trucks, and more.
Equipment breakdown is sometimes known as boiler and machinery insurance. Often part of a BOP, it covers repair and replacement expenses, including time and labor costs, to a business's mechanical, electrical, and computer equipment when unexpected failures strike them. In addition, the policy helps defray expenses due to lost income, spoiled inventory, and related costs occurring while the business and equipment are in the restoration process.
Equipment breakdown insurance covers these types of business equipment:
Mechanical – manufacturing equipment, pumps, and refrigeration units.
Electrical – boxes, panels, cables, and transformers.
Mechanical – motors, engines, generators, elevators, and escalators.
Electronic & Communication – computers, tablets, network devices, phone and voice mail systems, security, monitoring equipment, and fire alarm systems.
Environmental – HVAC systems, boilers, and pressure equipment
Equipment breakdown insurance is recommended even when a business rents the space it occupies. That's because a third-party such as a power or cable company can adversely affect a business by causing its equipment to fail or malfunction.
As it is commonly known, Workers' Comp is mandatory per state law nearly everywhere. It protects employees with coverage for medical costs, rehabilitation expenses, and lost wages when they suffer a work-related injury or illness. Check the state laws where your insureds operate to know the specifics and requirements.
Cyber Liability insurance, aka Data Breach Insurance, covers losses from cyberattacks, data breaches, and the downtimes they cause. Examples of cyber liability events include malware, ransomware, code injection, DDoS, phishing, and inside threats. In addition, insurance companies require stricter and more effective security safeguards before underwriting or renewing cyber liability policies. In addition, they understand that controlling system access through privileged access security systems is essential to mitigate liability and lower cyber risk threats from external and internal actors.
Business Interruption (BI)
Business interruption insurance is often found in a bundle of coverages inside a BOP. It covers losses related to a business forced to shut down due to an unforeseen event temporarily. BI covers lost income, operational expenses, and business property rent when an insured event causes a business to stop or cut back its daily business operations. Take note of a growing trend among property owners that demand their renters carry adequate BI coverage as a hedge against a tenant's inability to make rent payments because they have lost their business income.
Depending on the carrier, policy, and program, you will also find Professional Liability Insurance (E&O Insurance), Employment Practices Liability (EPL), and Umbrella (Excess) coverages are often included and advisable in some BOPs and virtually all comprehensive commercial insurance programs. Check with your Program Administrator for your options.
Commercial Insurance Costs (and what factors affect the price)
The costs of commercial insurance vary widely and are dependent on numerous factors. These factors include the type of business, the history of insurance claims, financial health, annual revenue, number of employees, and location; all affect a policy's costs. For specific examples, a standard BOP runs about $600 - $700 annually, and Commercial Auto costs range from $500 to $1,500 per year.
Best Commercial Insurance Programs
Naturally, when you begin a search for the best commercial insurance programs, you want a convenient solution that provides quick, accurate results. For example, the Program Business Market Directory connects wholesalers, MGAs/MGUs, program administrators, and carriers with independent agents looking to place business.
A quick search on our platform for commercial insurance, and you would find the listing for Chamber Insurance Agency Services. It is a national Program Administrator, and a wholesale agency providing agent and brokers access to exclusive national Program Administrator programs and an array of commercial insurance products of nationally recognized insurance carriers. Its options for BOPs include Umbrella, Professional Liability Insurance, and Employment Practices Liability Insurance.