Understanding Commercial Insurance Risks and Business Insurance Covers

If you own or manage a business, either large or small, you will require some type of insurance to protect your company against the various risks and potential multitude of claims, that your business will face.

Commercial insurance or Business insurance as it is commonly known, is a complicated area of underwriting and because all businesses are different, and face different risks depending upon the nature of the company, various packages and combined policy covers have been introduced by insurance companies and commercial broker schemes, to make the process easier.

An example of a small business insurance package which is commonly sold online is the Tradesman’s insurance package, which includes all elements of cover required by a small business or self employed trader such as basic liability covers and theft of tools.

Other small business insurance packages that are trade specific and can often be obtained online are available for shopkeepers, offices, surgeries, hotels and guest houses, restaurants, public houses and builders.

Large companies will be offered what is known as a commercial combined policy which has many different elements of cover which can be combined to make a bespoke policy for the enterprise. Most large companies will require some degree of risk assessment before the policy is underwritten, which may often include a visit to the business premises or site, and for this reason these types of larger business usually employ the services of specialist commercial insurance brokers.

Business Risks

The largest risk that a business faces is from liability to others, and the potential costs and damages a company could face if a claim was made against it.

All companies are required by law to have in place liability cover, called Employers liability insurance or EL, to protect their staff against all potential risks and accidents  while in the workplace.

Business liability insurance is usually sold as a package and will always include Public Liability, often just known as PL, which protects the company against claims from the public whilst on the business premises.

A further type of liability insurance called Product liability is also available to companies under a commercial liability policy which protects the company against claims made for design or manufacturing faults in the product.

Company directors can also protect themselves against liabilities with Directors and Officers insurance (D&O) cover.

Property Damage

Most business large and small will have premises that need protection against buildings perils such as fire and flood and commercial property insurance is available to cover all buildings insurance risks. Similarly commercial contents insurance for business premises is available which covers office and business equipment including files and data processing against the common perils. For companies that carry stock, this type of business contents insurance can be extended to cover risk such as deterioration and damage.

For the small businessman who works from home these covers are often available with strict limits of indemnity, as a bolt on to a standard home buildings and contents policy. This type of cover is often effective for self employed people with just a computer and a home office.

Business Contingency Cover

One of the largest problems faced by a business is that of how to continue in business should the worst occur, for example a fire that destroys the premises. In order to deal with this Insurance companies have devised a cover called ‘Business Interruption Insurance’. Based on your previous years annual turnover, this protection insurance covers your company against all losses caused by interruption to trading due to any of the perils mentioned on the policy and will pay out on a indemnified basis for the period of cover agreed in the policy. Most policies will also offer some type of alternative trading accommodation to enable you business to continue whilst the premises are being repaired.

Additional Commercial Risks

Because commercial insurance is designed to cover all classes of business, there are many various trade or business specific covers available which can be added to a combined policy. Examples of these covers include loss of licence to trade, glass cover, goods in transit cover, book debts, commercial vehicle insurance, hauliers cover, warehouse cover, engineering insurance and plant inspection services, and theft by employees.

Outside of most combined policies are additional risks more often sold under separate policy covers, that should be considered to protect your business against all eventualities.

Examples of these are, Commercial Legal Expenses insurance cover which protects the company against claims made by employees for unfair dismissal and allows you to bring cases against suppliers.

Various protection policies are also available for businesses including Keyman insurance which provides cover against the loss of key people within your organisation. Business mortgage protection provides a monthly payment for business premises should you suffer and accident or sickness. Group ASU policies are also available to protect your staff and employees.

Purchasing Business Cover

Purchasing commercial risks insurance can be a daunting experience for the uninitiated small business owner and unless the risks are straightforward and can be underwritten online, it is advisable for all companies to approach the services of a local or regional commercial insurance broker. Insurance Brokers will not only be able to assess the complete range of risks that your business is exposed to, and provide the correct levels of cover, they will more often than not have a unique local knowledge of the risks involved and will be able to negotiate premiums that reflect the nature of the risks. Furthermore, in the event of a claim, and as most businesses will be faced with claims at some point in their trading life-cycle, the broker will handle all the settlement negotiations with the insuring company and allow you to continue what you do best – running your business.

Commercial Insurance That’s Right For Your Business

Unless you are a very small business running without a lot of overhead and liabilities, it is a very good idea to have commercial insurance. Indeed, your financial safety could very well depend on it as commercial not only allows you to recoup your losses in the event of a disaster outside your control, but allows you get your business up and running again. Commercial insurance can also save the ruin of your business by those who would seek to benefit by suing you for damages they have sustained directly in your workplace or through the products and/or services that you market.

There are three components to commercial insurance, and you can buy policies that cover one or all of them according to the type and size of business you own. The first one of these, property insurance, is most similar to homeowner’s insurance. It reimburses you for damage to your place of business, whether through fire or damage from burglary. As with all insurance policies, you must be careful in making sure that you get the coverage you think you might need. Indeed, it can often be a good idea to get coverage for things you don’t think you will need, if the extra cost is reasonable.

Commercial liability insurance is also an important component of commercial business insurance. It guards against lawsuits brought on by customers, and allows you to be reimbursed for things like legal fees and settlement money. Some professions need liability insurance more than others. The healthcare profession, for instance, needs malpractice insurance as they work directly with patients’ health and a mistake here could be very costly. Malpractice insurance affects other professional fields as well, from architecture to accountants. Even businesses that sell a product may benefit from this insurance in the event that a customer suffers some injury or damages due to their company or product. Indirect damage, such as Errors and Omissions, can be covered under liability insurance. You can also be reimbursed if your product causes harm to a customer, or if a company vehicle causes the damage. Under commercial vehicle insurance, you can also get coverage that will reimburse you if your vehicle suffers any damage or is broken into. Remember that there are many frivolous lawsuits these days and even legal fees can have a devastating effect on a business. Commercial liability insurance can make the difference between whether or not your business survives such a lawsuit.

The third type of commercial insurance is worker’s compensation insurance, and this is to protect you as the employer from exorbitant expenses if your employee is injured while on the job. Most states in the U.S. require some form of this insurance, and it reimburses the employer for medical bills and days of work missed due to the injury, as well as lawsuits for employer negligence.

Choosing A Commercial Insurance Policy

Choosing the correct commercial insurance for your business needs can be daunting enough even for a seasoned businessman or negotiator. For a start-up enterprise ensuring that the business has full and proper protection against all risks, it is an even larger minefield.

There are however some basic rules of insurance, which if born in mind while looking for the right commercial policy, will ensure that the enterprise is neither under or over insured and has the necessary cover in force.

For a commercial insurance contract to be valid the proposer must have what is known in the industry as ‘an insurable interest’ in the object of the cover. This immediately helps define the type of property insurance policy that a businessman might require.

The business risks to be insured under the policy are not the physical object themselves but the financial value of such, which is defined as the interest that a policyholder has in the objects should they suffer loss if the insured risks occur.

Clearly then the type of policy that a business will require depends upon whether the proposer is the owner of the commercial property, or a leaseholder or tenant.

An owner of a commercial premises who lets or leases a building, no matter the type of business activities that may be pursued there, would only have an interest in the buildings fixtures and fittings of the property concerned and any liabilities to the public that may arise from these.

A lease-holders interest in the buildings may be dependent upon contract of lease and should be checked thoroughly with the agreement. Often a contract will make it the responsibility of the lessee to provide cover for the lease term.

Owner occupiers of commercial premises will have a financial interest in both the buildings and contents of the property and will require insurance for both.

Rented commercial property buildings cover is not usually the concern of the tenant who will only have an insurable interest in any contents of the building and in any improvements that they may have made to the property in order to carry out business.

Before getting any commercial property insurance quotes it is necessary for the businessman to calculate the values of all the buildings, contents and stock. Buildings value should be based upon the rebuilding costs following a total loss and allowing for inflation. Accurate annual turnover figures will be required for contents insurance. If high value stock items are kept at the property, then the value of these should be determined individually.

Applying for commercial insurance quotes online might only take a minute or two to complete, however the preparation needed to obtain accurate data to supply to the insurance company could take a lot longer. It is unlikely that even the small businessman has calculated the value of his office contents for replacement purposes.

Ensuring that the information you supply on a commercial insurance proposal form is correct, is not only legally required, but is essential if you wish to avoid problems if a claim has to made at a future date. Problems can quickly arise with disagreements over the value of stock or office equipment values following a major loss, especially where the declared values are not sufficient and an average or proportional reduction to a claim is imposed.

Having established any property risks that a commercial enterprise may be exposed to it is then necessary to look at all the potentialities and risks that the business might be liable for, in the course of carrying out its commercial activities.

Liability insurance is essential for all enterprises, large or small.

Public liability insurance protects the business against any claims from the public for loss or damage suffered, for which the business could be held liable. Employers liability, a type of workers compensation insurance, protects a business against being sued by its employees and is a legal requirement.

Most commercial liability insurance is sold by trade or professional type with risks and covers that are specific to that business type. Additional liability insurance such as professional indemnity insurance which covers professionals against negligent advice or product liability for shops providing goods, are examples of such.

Buying a combined tradesman or professional service stand-alone liability product is today a simple process using one of the many liability insurance comparison websites that exist online.

It is possible to buy commercial insurance for both liability and property combined for any type of business, under what is called a ‘combined commercial insurance policy’. This type of flexible contract allows specific risks to be added and limits of indemnity chosen and is often known as ‘all risks’ cover.

For specific types of commercial insurance risks such as shops and offices, where property values and liability cover can be easily assessed, it is now possible to compare many covers and buy online what are known as packaged policies.

The Internet offers many full ‘all risks’ commercial insurance policies covering every eventuality and consequential loss, which are available from online insurance brokers, comparison sites and direct from commercial insurance companies themselves. If you have any doubts about the necessary cover for your particular business it is advisable to consult a commercial insurance broker who will offer advice and the latest market information.