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Understanding Small Business Insurance

At a glance:


As a business owner, it’s imperative to do everything you can to protect your operation and livelihood. That’s why business insurance is so important. If you’re searching for a new commercial insurance policy or it’s time to renew an existing business insurance policy, a little background knowledge will make you more informed and positioned to secure better rates when you find the coverage that you need.

Learn the ins and outs of small business insurance then check out CoverHound to explore resources that help you plan, prevent, and insurance against the unexpected.

Commercial insurance and business insurance

Business insurance, commonly referred to as commercial insurance, is insurance coverage for businesses and corporations. It is intended to cover the business, employees, property owned by the business, and ownership. If you’re starting a new business, it is wise to secure commercial insurance coverage and ensure that your coverage is always up to date because you never know when disaster will strike. Commercial insurance can protect your business in times of legal trouble and in some cases, commercial insurance is required by law. Below, the 7 types of small business insurance and commercial insurance are explained in detail.

7 types of commercial insurance and business insurance

General Liability Insurance: It’s smart for small businesses to hold a general liability insurance policy. General liability insurance covers you if  a product you provided to a client caused them bodily harm or their property serious damage. A shockingly high number of small business owners have been hit with the threat of a lawsuit by an employee and/or client. On average, when a lawsuit does make it to court, a small business earning $1 million a year will spend $20,000 in litigation fees. General liability insurance will protect you General liability insurance will help cover medical expenses and legal fees resulting from bodily injuries and property damage for which your business may be legally responsible. General Liability Insurance also protects your business from the most common claims that can arise as a result of normal business operations - including claims of property damage, personal injury, libel, slander, and defamation.

Professional Liability Insurance: Commonly sometimes known as Errors & Omissions Insurance, E&O insurance, or malpractice insurance, professional liability insurance provides coverage if a client sues your business for professional services rendered that caused them bodily harm or property damage. General liability insurance does NOT offer this type of coverage.

Property Insurance: If you own the warehouse or structure in which your business is housed, including the equipment and inventory, this policy will cover the property in the case of theft, vandalism, fire, smoke damage, and natural disasters.

Commercial Auto Insurance: If your small business owns and operates a fleet of vehicles, uses a vehicle to conduct business, or delivers goods, you will need commercial vehicle insurance. Commercial auto insurance offers bodily injury and property damage liability if you or an employee should suffer an accident during business hours when operating a company-owned vehicle. It is important to note that commercial auto insurance, commercial vehicle insurance, and commercial truck insurance are all different names for the same form of coverage, regardless of the type of vehicle used to conduct business.

Business Owner’s Policy (BOP): A BOP insurance policy is small business insurance that pairs general liability insurance and business property insurance into one policy. The general liability insurance will help cover medical expenses and legal fees resulting from bodily injuries and property damage for which your business may be legally responsible. Business property insurance protects damage to a rented or owned property and the equipment inside it. A Business Owner’s Policy is the ideal form of coverage for many business owners. 

Workmans Compensation: Required by law in every state, worker’s compensation insurance offers coverage to you and employees if injuries occur performing a work-related task during working hours. To reap these benefits, an employee must sign an agreement that gives up the right to sue the employer for an injury sustained in a work-related incident.

Cyber Liability Insurance: This comes as a surprise to some small business owners, but small businesses are big targets for the cybercriminal. If your small business files confidential information about staff and clients electronically, a data breach policy will cover the loss.

How to get cheap commercial auto insurance

Required by law in almost every state, commercial auto insurance is a good idea — whether your state requires it or not. Here is an in-depth look at how to save on your commercial vehicle insurance rates, and some things to keep in mind when you compare commercial auto insurance.

Vehicle Type and Use‍

Do you drive a small car to deliver flowers or do you have a large truck that is the backbone of your construction business? Commercial auto insurance policies vary greatly depending on the number and type of vehicles that are covered and how those vehicles are used.

Insurance carriers use vehicle classifications and the function of commercial vehicles to help determine risk and monthly premiums. For instance, trucks, tractors, and trailers that weigh more have more potential to do serious damage in an accident. Therefore, those vehicles will cost more to insure than a compact passenger vehicle.

Rates will also vary depending on the vehicle’s purpose. The Insurance Services Office (ISO) has several vehicle classifications that are used to calculate premiums.

- Service Use: transporting people and materials to worksites

- Retail Use: making deliveries to residences

- Commercial Use: catchall for other uses besides service and retail

Drivers‍

Who is operating your commercial vehicles? The driving history of your employees will ultimately impact your cost of commercial vehicle insurance. You are responsible for collecting and providing the driver's license numbers for every person who will be covered under your policy. Insurance carriers will check the driving and claims history of those employees to assess the likelihood (or risk) of an accident and claim being filed. If you work with lower-risk drivers, you may see substantial savings in your premiums. The inverse is true, so hire wisely when considering who will drive company vehicles.

Location‍

Driving down a country road is going to look and feel much different than trying to maneuver through a city at rush hour. Where you drive ultimately affects how much risk you present to carriers. Therefore, the ISO breaks down different states and regions into rating territories.

Some examples of territorial differences could be the contrast between a busy metropolitan and a completely rural area, or a coastal region versus a landlocked zone. The who, what, and where of driving come together to help determine your commercial auto insurance rates.

What is Umbrella Insurance

Umbrella coverage adds an extra layer of coverage and financial protection to an existing Business Owners Policy or General Liability Policy insurance policy. Umbrella coverage will help you avoid paying out-of-pocket for large claims that exceed the limits of a Business Owners Policy or General Liability Policy. It is important to note that in some instances, Umbrella insurance can only be added to a Business Owners Policy or General Liability Policy with the same carrier.

How does umbrella coverage work?

A patron at your flower store trips on an uneven step and smashies through a heavy glass door. Their injuries require an ambulance ride, 3 days of hospitalization, and surgery costing $450,000. The bodily injury limits on your Business Owners Policy are $300,000, leaving you with $150,000 in out-of-pocket expenses. Umbrella coverage will kick in when the limits of your Business Owners Policy are reached and pay the remaining $150,000 in medical expenses.

Cyber Liability Insurance: What is it?

Cyber Liability Insurance is a class of business insurance that protects the digital components and digital assets of a business. In the same way that General Liability Insurance or a Business Owners Policy covers the physical pieces of an operation, Cyber Insurance covers the intangible pieces like email, software, data, and computer networks. It’s a business’s safety net against hackers and cybercrime. Cyber insurance covers:

Data Breach Loss: Assists in the cost of the network investigation (to understand where and how the cybercriminal was able to gain access) regulatory fines and legal costs.

Ransomware Infection Loss: Assists in the cost of paying the ransom for the data or to help pay for the restitution clients will seek once the cost of the damage is shared with the public. Clients/customers will likely sue if their personal information has been compromised. Cyber liability insurance will cover the legal fees and settlements.

Business Interruption: Assists in the cost of loss of business. If a business must close until the network is patched up or data is recovered, you will have expenses, such as employee salaries that still need to be paid, cyber liability insurance will have you covered.

Insurance shopping simplified

Review personalized quotes, select coverages, and buy online - Everything insurance, all-in-one-place.
BUSINESS INSURANCEPERSONAL INSURANCE

Insurance shopping simplified

Review personalized quotes, select coverages, and buy online - Everything insurance, all-in-one-place.

Insurance shopping simplified

Review personalized quotes, select coverages, and buy online - Everything insurance, all-in-one-place.
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