Understanding Commercial Insurance
Business owners purchase commercial insurance policies to protect themselves and their companies from financial responsibility resulting from claims made against them. There are several types of policies available that cover different incidents and insure different assets. These policies also aid in the defense of the insured as well. Not all commercial insurance plans have to be purchased, but some are for certain businesses to be in operation.
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Benefits
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With commercial insurance, business owners protect themselves from financial loss and company assets from being liquidated to pay award amounts. By purchasing commercial insurance plans, liability is transferred from the businesses to the insurance companies. The insurers conduct investigations into claims made against the insured and also cover their legal expenses as well. Another benefit is that commercial insurance policies cover the actions of employees, staff and independent contractors hired by the company.
Types
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There are several types of commercial insurance policies available to business owners. Some insurance plans, such as commercial auto and property policies, protect businesses from paying for damages caused by or to those company assets. Other policies such as commercial and professional liability plans shield businesses from financial responsibility due to damages suffered by clients, patients and customers using their services or products.
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Considerations
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Insurers consider several factors about applicants before granting or denying commercial insurance plans. Some of these factors include the applicant's business location, work industry, claims history and coverage amounts. Premiums are also affected by these factors, with higher amounts given to businesses that are higher risks than standard applicants. Some of these policies also come with deductibles, which is the amount the insured have to pay before insurance companies pay for any claims.
Misconceptions
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Business owners who don't purchase commercial insurance policies because their assets are already protected by personal insurance plans are unprotected against lawsuits brought against their company. For example, for owners who use their personal vehicle to conduct business and are in an accident, their personal auto coverage doesn't cover lawsuits suing the company for damages. And a homeowner's insurance policy, which covers furniture and other belongings in a home, typically doesn't cover business equipment used in a home office, according to Business.gov.
Warning
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Not having enough coverage can be equally devastating as having no insurance policies at all. Insured businesses are responsible for any award amount out of pocket that exceeds the policy's coverage limit. Coverage amounts should be in line with the business industry's averages. Without commercial insurance coverage, business owners have to pay for their own legal defense, which can cost them tens of thousands of dollars. Also, most commercial insurance policies are optional purchases; however, some aren't. Taxi drivers must have commercial auto insurance to operate their vehicles, and in states, such as Colorado, doctors are required to have medical malpractice coverage.
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References
- Business Insurance Now: General Liability Insurance
- iBank: Property Liability Insurance
- Car Insurance: When Should I Consider Commercial Auto Insurance Instead of Personal Auto Insurance?
- Nationwide: Business Liability Insurance
- Entrepreneur: Cover Your Cars
- Business.gov: Types of Business Insurance
Resources
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