As a business owner, you face financial risks long before you ever start generating revenue. From product liability and professional errors to employee injuries and commercial property damages, all it takes is one catastrophe to take down your business and render it insolvent. That is why most business owners need the right insurance policies in place on day one of operations. The following are several types of commercial insurance coverage frequently purchased by small and mid-sized businesses.
Business Owners Policy (BOP)
A Business Owners Policy – also known as ‘BOP’ Insurance – is a combined coverage policy that includes several different general risk protections. By bundling property damage insurance, general liability insurance, and business interruption insurance into one policy, business owners can enjoy convenient coverage management, spread out their risks with the same carrier, and potentially achieve greater savings on premiums than if the coverages were purchased individually. Although BOP Insurance is not right for all businesses, it can be an affordable and efficient choice for businesses that fit standard, low-risk profiles.
*It is important to note that many businesses will need additional commercial policies in addition to their Business Owners Policy, as BOP Insurance does not include coverage for workers compensation, professional liability, commercial vehicles, or health and disability.
Commercial Auto Insurance
Commercial auto insurance covers a business against third-party injury and property damage liability. Policies can also include comprehensive and collision coverage for physical damages to company vehicles, whether due to an accident or a non-collision event. Most businesses need commercial auto insurance when they own company vehicles. This could include a simple, single-vehicle policy for a small floral delivery van or a complex commercial policy to cover an entire fleet of work trucks. Although employees typically rely on their own personal insurance when driving personal vehicles for business purposes, businesses may still need commercial coverage when employees use their personal vehicles for the delivery of goods or services in exchange for a fee.
Commercial General Liability
Commercial general liability insurance helps safeguard a business against expensive litigation processes and outcomes when they pertain to certain type of covered claims. These typically include third-party bodily injuries and property damages, as well as personal injury, advertising injury, medical payments, and more. Different businesses have different levels of exposure, meaning some may need higher coverage amounts to adequately mitigate their risks. If a business purchases too little liability coverage, it risks paying extensively for any legal fees and damages that exceed the coverage limits of the general liability insurance.
Commercial Inland Marine
Commercial inland marine coverage is for businesses that need to cover property or cargo regardless of its location over land. This could include businesses that utilize mobile equipment or have operations that involve the shipment or transportation of goods. This coverage is often recommended for contractors that work and use equipment at various job sites, as well as companies that transport and/or deliver valuable cargo. For example, a business may need inland marine insurance if they own vending machines that are left at a third-party premises or if they house valuable third-party belongings in their businesses, such as fine art or client pets.
Commercial Property Insurance
Commercial property insurance is coverage for the physical assets of a business against damages caused by certain types of covered events. Though details can vary from insurer to insurer, these generally include fire, smoke, vandalism, wind, hail, fallen objects, and more. While property insurance covers the physical structure of the buildings owned by a business, it can also be important for businesses that lease their properties or operate from a home office. That is because commercial property insurance typically extends to cover signage, inventory, furnishings, fixtures, and more.
Commercial Umbrella Insurance
When businesses get sued, their general liability insurance often covers the cost of hiring a lawyer and paying for any damages awarded to the victim. Sometimes, even the highest general liability insurance limits are too low to cover the financial obligations a business has to the victim(s). In these cases, commercial umbrella insurance can help absorb the damages remaining beyond the limits of the general liability policy. Commercial umbrella insurance usually comes with millions of dollars in extended liability protection that can help protect a business against bankruptcy following a major lawsuit. In many cases, it is what allows the continuity of a business rather than its closure after a lawsuit.
Commercial Crime Insurance
It is not just banks that are robbed; other businesses and their customers are often targeted by criminals, too. Sometimes there are inside jobs carried out by employees, and sometimes there is fraud of forgery involved in the transfer of funds. Commercial crime insurance can help protect a business against some of the financial risks associated with employee dishonesty, extortion, computer fraud, forgery, counterfeit money, kidnap, ransom, and more. Whether someone in the accounting office writes checks to a fake vendor or a large deposit is stolen from a manager at gunpoint on the way to the bank, commercial crime insurance can help minimize the cost to the business.
Workers Compensation
Employers are responsible for maintaining a safe working environment. However, there are physical risks associated with employment, with some occupations demanding more risk than others. Workers compensation insurance helps pay for the lost wages and necessary medical and rehabilitation bills incurred by an employee that has been injured on the job, regardless of whether the business has any actual liability for the incident. Although workers compensation is required for nearly all employers in most U.S. states, this coverage does much more than protect the workers against high medical expenses and lost wages. In many cases, it can also protect a business against a workplace injury lawsuit, too.
EPLI
Employment practices liability insurance – also known as EPLI – is coverage for the costs and damages associated accusations of wrongful employment practices. Examples include allegations of race, sex, disability, or age discrimination, as well as wrongful termination, sexual harassment, and more. Businesses should purchase EPLI coverage from the moment the first employee is hired, as well as take steps to prevent claims and accusations. This could include the development of an employee handbook that details the expectations and policies within the workplace, as well as discipline protocols and a process for filing complaints. Employers should also keep detailed employee files, post public equal opportunity statements, and implement a zero-tolerance policy for unacceptable dialogue and behaviors associated with harassment, discrimination, drug and alcohol abuse, and more.
Cyber Liability Insurance
The dark web contains a vast network of cyber criminals looking for ways to steal sensitive information and private data. Cyber liability insurance helps cover small businesses when criminals target and exploit the information in their databases. Although it does not usually pay for direct financial losses associated with cyber theft, it does typically cover the costs associated with the data breach, which may include fines and penalties, as well as the cost of notifying affected customers and paying for their credit monitoring services. It can also cover legal defense costs against investigations and legal advancements from state regulators.
Directors & Officers Insurance
Also known as D&O, directors and officers coverage helps protect the owners, officers, and directors of a business or non-profit, as well as their spouses, against personal lawsuits associated with the operation or management of the company or organization. This coverage typically provides compensation for legal defense costs, as well as judgments or settlements resulting from litigation. D&O is beneficial for directors and officers that are at risk of being sued by vendors, customers, employees, and even competitors for things like misuse of funds or misrepresentation of the company. Without D&O coverage, the cost of defending a lawsuit could cause financial ruin to a company’s directors and officers.
Equipment Breakdown Protection
Many businesses used special equipment to produce goods or provide a service. Without this equipment, it would be impossible to continue operations as normal, which could hamper cash flow. Examples of covered equipment include refrigeration equipment, computers, fax machines, photocopiers, and more. Equipment breakdown protection – also known as boiler and machinery coverage – helps cover the cost of repairs or the replacement of equipment that has been damaged due to a covered event. This may include damages caused by human error or an uncontrollable event, such as a power surge.
Errors and Omissions Insurance
E&O insurance is coverage against accusations of third-party damages caused by professional errors and mistakes. This coverage protects business professionals against claims of negligence or failure in carrying out professional obligations. While it does not cover fraudulent acts, false advertising, and certain other damages, it generally does cover things like legal defense fees, copyright infringement, libel, slander, negligence, alleged negligence, and more. Often, ‘errors and omissions insurance’ is used as an umbrella term referring to more specific types of coverage, such as medical malpractice insurance or professional liability insurance. Examples of professionals who may need errors and omissions insurance include real estate agents, accountants, therapists, nutritionists, consultants, architects, doctors, lawyers, engineers, and more.
Marine (Cargo) Insurance
The shipping industry is responsible for transporting the vast majority of the world’s cargo. Marine cargo insurance helps protect businesses against damage or loss of cargo during transport, whether by ship, plane, or train. Insurers may issue Free of Particular Average (FPA) coverage that provides coverage only for specific name perils, such as damages caused by inclement weather or loss due to theft. However, many marine insurance policies include all-risk coverage that protects against all losses with the exception of those excluded by name. Examples of common exclusions include rejection by Customs authorities, abandonment of cargo, or damages caused by inadequate packing.
Product Liability Insurance
From foods that trigger a dangerous allergy to defective small kitchen appliances that pose an electrical fire hazard, there are many things that can go wrong when a product is improperly made. That is why manufacturers, suppliers, wholesalers, and retailers all need product liability insurance. This coverage helps to protect against financial responsibility for third-party injuries, damages, and other losses caused by the design, manufacturing, marketing, or even the misuse of products a business produces or sells. Product liability insurance can help cover the cost of hiring a legal defense, as well as the cost of compensating victims for any medical bills or damages they may have incurred.
Professional Liability Insurance
Much like errors and omissions coverage, professional liability insurance helps protect service professionals against the financial weight associated with a lawsuit and accusations of professional errors and negligence. This coverage makes it possible to continue operating a business despite making a mistake that results in unintentional harm to a client. Whether an architect’s house plans result in a major construction error or a home inspector misses a major home defect due to an inadequate inspection, professional liability insurance is designed to safeguard a business’s income and assets against the cost of litigation.
Technology Insurance
IT businesses are constantly bringing ideals to life through the development of unique systems and services. From web developers and data storage services to companies that develop and innovate new hardware and software, there are risks associated with the technology sector. With technology insurance, companies are covered for their liability and property loss risk exposures, whether they create technology, distribute technology, or simply work with technology.
Liquor Liability Insurance
Businesses that sell, serve, or furnish alcohol need liquor liability insurance. This coverage protects against third-party damages that occur as a result of serving alcohol to a guest, whether directly or indirectly. For example, a restaurant may file a claim against liquor liability coverage to help pay for legal defense fees for a lawsuit accusing the business of responsibility for a car accident victim’s injuries caused by an at-fault driver who became overly intoxicated at the restaurant. Liquor liability coverage may also cover liability for on-property fights among business patrons, slip-and-fall injuries, and more.
Transportation Insurance
There are many different types of businesses that operate in the transportation industry. From truckers and limousine services to small businesses that deliver their own goods through a private fleet, there are many risks associated with the movement of people and cargo. Depending on the specific type of transportation services offered, a business may need inland marine, commercial transportation, or some other type of transportation insurance to help protect drivers, vehicles, cargo, and more against potential losses and damages.
Bonds
For many businesses, it is not enough to be insured; they must be bonded, too. Commercial bonds come in two types – fidelity and surety. A fidelity bond is essentially a type of insurance that protects a business against employee theft. A surety bond a guarantee required by a third-party, such as a contract service customer, that the business will faithfully perform the services it is hired to do. The company behind the bond assures the customer that damages will be covered even if the contractor fails to follow through. The contractor is still ultimately responsible for paying the damages, but the promise behind the bond gives the customer greater confidence in hiring the contractor.
