Common Types of Commercial Insurance
Property insurance, liability insurance, and workers’ compensation are the most common type of commercial insurance. Generally, property insurance pays for damages to your business property; liability covers damages to third parties involved in an accident; and workers’ comp covers employee injuries that happened on the job. Depending on the type of business, you may have supplementary specialized coverage policies. Here is a list of some of the most common types of business insurance.
Property insurance compensates you for losses and damages to real or personal property. For instance, if your office building received damages from a fire, property insurance would cover the repair those damages. You can also buy additional coverage policies for business property, including:
- Glass Insurance: This type of insurance covers the repair to broken business windows and plate glass windows.
- Inland Marine Insurance: Inland Marine Insurance covers the property on your premises that is in transit, as well as other people’s property that is on your premises. For example, this insurance would cover fire damage to your customers’ clothing if a fire were to break out in your dry cleaning business.
- Debris Removal Insurance: This covers the cost of removing debris resulting from a flood, windstorm, fire, etc. For example, if a fire burns your building to the ground, before you can begin to rebuild, the remains of the old building must first be removed. A standard property insurance policy will cover the costs of rebuilding, but not the costs of getting rid of the debris.
- Boiler/Machinery Insurance: Sometimes called “equipment breakdown” or “machinery breakdown,” this type of insurance provides coverage for the accidental breakdown of boilers, machinery, and equipment. Normally, it reimburses you for property damage and business suspension losses. For instance, this type of insurance would cover fire damages to business computers.
- Builder’s Risk Insurance: B.R.I. covers buildings that are under construction. For example, a builder’s risk policy would cover the damages that a windstorm would cause your partially constructed apartment complex.
- Ordinance/Law Insurance: Ordinance or Law Insurance covers the expenses that arise when you must destroy and rebuild to code when your building has been partially damaged (usually 50 percent). For example, your three-story apartment building is 75 years old and a flood destroys the first two floors and the basement below. Because over half of the building needs to be reconstructed, a local ordinance requires that the building be completely demolished and rebuilt conforming to current building codes. Standard property insurance only covers the replacement value, not the necessary upgrade.
- Business Interruption Insurance: This insurance covers the expenses and income that are lost due to property damage. For example, if a fire forces your business out of commission for three months, this insurance would recompense you for taxes, salaries, rents, and net profits that you would have made during the three-month span.
- Tenant’s Insurance: Commercial lease tenants are often required to have a particular amount of insurance. A commercial policy will cover any building damages that were caused by the negligence of your employees.
- Fidelity Bonds: If a bonded employee steals any business property or money, a bond company will cover the losses.
- Crime Insurance: This insurance covers commercial property crimes such as burglary, theft, and the robbery money, stock, securities, and belongings from employees and outsiders.
Liability insurance covers third-party injuries that you caused. If you were sued for property damage or personal injuries, the cost of defending and resolving the suit would be covered by this policy. A general liability policy will only cover you for common risks. Here are some more specific kinds of liability insurance:
- Malpractice Insurance: This kind of insurance is also known as “professional liability insurance,” and it pays for the losses that come from injuries to third parties when a professional’s management slips below the profession’s requirement of care. For example, if a doctor makes a mistake that is uncommon in his specific practice, his patient might sue him. A malpractice policy will pay his defense costs as well as the judgment or settlement. This type of insurance is accessible for doctors, accountants, dentists, architects, real estate agents, and more.
- Errors and Omissions Insurance: E&O insurance covers accidental mistakes or failures that lead to the injury to a third party. The mistake must actually be accidental, and not just negligence or intentional. For example, this policy would cover damages that come from an insurance agent failing to file policy applicants, or a notary failing to properly fill out notarizations.
- Automobile Insurance: Company cars, trucks, vans, and trailers are covered by an commercial automobile policy. The policy will reimburse you if your vehicles are stolen, damaged, or if the driver injures another person or property.
- Directors’ and Officers’ Liability Insurance: Usually, a corporation or a nonprofit organization purchases this type of insurance to cover the cost of lawsuits against officers and directors.
- Workers’ Compensation Insurance: Workers comp covers an employer for an employee’s on-the-job injuries, and is required by various state laws. Generally, workers’ compensation laws forbid the employee from filing a negligence lawsuit against an employer for on-the-job injuries.
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Now that you are well informed on the different types of business insurance policies, the next step is to find legal guidance in order to decide what is right for your business. Speak to a small business attorney in your area for a free consultation.