Overview of Commercial Business Insurance Quotes
"Purchasing the appropriate commercial insurance coverage can make the difference between going out of business after a severe loss or recovering with minimal business interruption and financial impairment to your company's operations."
Whether you're contemplating starting a new business, are a new business owner, or have owned a business, commercial insurance can be one of the most important ongoing financial investments you make in the life of your company.
OPERATING A BUSINESS
A good business insurance policy makes operating a business far less challenging and helps with worry about suffering significant financial loss due to unforeseen losses caused by unpredictable future events taking place in your business.
COMMON BUSINESS LOSSES
Commercial insurance can protect you from some of the most common losses experienced by business owners such as property damage, business interruption, theft, liability, and worker injury.
One of the first steps in purchasing small business insurance is to contact a licensed insurance broker-agent who specializes in commercial coverages. Beginning a working relationship with a reliable, competent broker-agent can be as crucial to your business plan as getting professional advice from an accountant, banker, human resources analyst, payroll specialist, lawyer, or a trusted business mentor.
Use an Insurance Agent Specializing in Commercial Business Insurance
When conducting your insurance agent search, it's important to verify the broker-agent’s insurance license with the Department of Insurance. That dept. is responsible for licensing all broker-agents who sell or market insurance in your state. A broker-agent is issued a fire and casualty license, which enables him/her to sell commercial property and casualty insurance. After you have interviewed several broker-agents and checked their license status, you will be better able to determine the broker-agents with whom you would like to do business.
What Type of Business Insurance Do I Need to Purchase for My Business?
Depending on the individual risk characteristics of your business, the broker-agent will present you with different coverage options for purchasing commercial insurance, A broker-agent’s proposal is just that, an insurance proposal. When all is said and done it is your responsibility to make an informed decision and choose the insurance that best fits your business plan. The relationship that you build with a broker-agent is extremely valuable in this critical decision making process. An experienced broker-agent has dealt with hundreds of businesses similar to yours.
Since commercial insurance can be complex, you should feel free to discuss any terms, conditions, or concepts which are unclear to you with your insurance agent. It is part of an agent’s service to answer your insurance questions and help you understand the insurance you are purchasing, including buying a low cost business insurance policy. While your business may not need all commercial insurance coverage lines, it's a good idea to have a basic knowledge of the types of insurance coverage available. As your business changes and expands you will have the necessary knowledge to purchase new insurance coverage as new risk exposures arrive.
The following commercial lines of insurance cover broad areas of exposure common to most business operations:
Boiler and Machinery
Crime Casualty Insurance
Commercial General Liability
Property Insurance and Commercial insurance is divided into two main categories:
Property insurance provides coverage for property that is stolen, damaged, or destroyed by a covered peril. The term “property insurance” includes many lines of available insurance.
Commercial Property, Inland Marine, Boiler and Machinery, and Crime are the most common commercial property coverage lines. Limits of Insurance, and Coinsurance Buildings you own or lease as a part of your business, your business personal property, and the personal property of others make up the basic coverage sections of commercial property insurance.
Commercial property insurance can be sold separately as an individual line policy, or it can be sold as part of a Commercial Package Policy, which combines two or more commercial coverage parts such as commercial property, general liability, and commercial auto.
Building coverage includes buildings or structures and any completed additions, which are listed on the declarations page of a commercial policy. Permanently installed fixtures, machinery, and equipment are also insured as a part of building coverage.
The limit of insurance is the estimated amount needed to rebuild your building and to replace permanently installed fixtures, machinery, and equipment in the event of a total loss. You are required under the insurance policy to fully insure the value of your buildings. If a building is not insured to value you can be subject to a monetary penalty at the time of a loss. This penalty is commonly referred to as “coinsurance.” It is important to read and understand the coinsurance clause of your commercial property policy and to discuss any questions with your broker-agent.
Business Personal Property consists of furniture; fixtures, machinery, and equipment not permanently installed; inventory; or any other personal property owned by and used in your business. Personal Property of Others refers to property that is in your business’s care, custody and control.
The type of business you operate will determine if you need to protect the personal property of others.
Covered Causes of Loss
Whether or not a property loss is covered depends upon the policy language, exclusions, and endorsements.
Causes of loss are divided into two main categories: specified perils and open perils. Specified Perils consist of a list of each peril to be insured against, such as fire, explosion, windstorm, vandalism, et cetera. You can usually request basic specified perils or broad specified perils coverage. Broad specified perils coverage adds to the list of covered perils found under basic specified perils. Open Perils coverage covers all losses unless they are specifically excluded. Earth movement (including earthquake) and flood are two common perils that are excluded under open perils coverage. Since open perils coverage offers more comprehensive protection, it is more costly than a specified perils policy.
Valuation Types of Commercial Business Insurance
Commercial property coverage will include a provision to determine what valuation method is to be used to pay the loss. The most common policy valuation method is Actual Cash Value. There are two other methods of property valuation: agreed value and replacement cost. Agreed value waives any coinsurance penalty and pays 100% of the stated amount (agreed upon amount) for any covered loss. Replacement cost covers the amount it takes to replace your property with new property of like kind and quality up to the limits of insurance. Like ACV, replacement cost is subject to coinsurance. Coverage Forms and Endorsements There are various coverage forms and endorsements in addition to the basic property coverages already discussed that can customize coverage in a commercial property insurance policy.
The following are the most common coverage forms and endorsements used in commercial property insurance:
Builder's Risk - Added to a policy for a one-year minimum term to cover a new building or structure under construction or Small Business Guide to Commercial Insurance an existing structure undergoing additions, alterations, or repairs. Cancellation is allowed on a pro rata basis upon project completion; however, midterm cancellation will result in a short rate penalty. A reporting form or renovations form allows coverage to be carried according to the stage of completion (i.e., as more of the project is completed, more value is reported, resulting in the proper amount of coverage for each stage of construction).
Legal Liability or Fire Legal Liability - Covers your legal liability for loss or damage to real and personal property of others as the result of your negligent acts and/or omissions. The loss or damage must be caused by a covered peril (including loss of use). The loss must be accidental and the coverage most often is purchased for tenants in commercial buildings.
Building Ordinance or Law - Provides coverage if the enforcement of any building, zoning or land use law results in loss to the undamaged portion of the building (Coverage A); demolition and removal costs of undamaged parts of the structure (Coverage B); or any increased cost of repairs or reconstruction (Coverage C). Replacement cost must be in effect for Coverage C to be applied.
Improvements and Betterments - Usually added by a lien holder. Covers all permanently installed improvements and betterments, which cannot be removed when a tenant vacates the building.
Glass - Basic specified perils for glass coverage include any resulting damage to other property from broken glass due to vandalism and also vandalism to glass building blocks. Broad and specified perils covers $100 per pane of glass up to $500 per occurrence. A glass form must be added for scheduled glass insurance coverage when there is a significant glass risk exposure to insure. The glass coverage form includes the number of panes, dimensions, glass location, lettering, and ornamentation. A separate glass deductible may be scheduled as well.
Peak Season - An endorsement that provides additional limits on personal property inventory during a designated period of insurance coverage time. This is specifically used to cover fluctuating inventory values before and during peak shopping seasons.
Inflation Guard - Automatically adjusts the limits of insurance to keep up with inflation. The adjustment can be tied to the construction cost index in a regional area or a specified percentage per year. This endorsement can be very important in helping to maintain adequate coverage limits, which can protect against potential coinsurance penalties in a property loss.
Time Element - Insurance that covers other losses stemming from a direct loss by a covered peril to business property. Business interruption, extra expense, and loss of rents and rental value are the most common time element coverages. Business interruption coverage replaces lost business income after a covered loss. Certain key employees can be named, allowing the employer to continue to pay their salaries until the business restarts operations after a loss. Extra expense coverage mainly applies to service or product related companies where the business must continue to ensure the survival of the company. Extra expense can pay for office space, equipment rental, advertising, or most costs considered reasonable for keeping the company operating after a covered loss. Loss of rents and rental value cover loss of rental income to the property owner caused by damage or destruction of a building rendering it unfit for occupancy.
Without prior knowledge of inland marine insurance, it is easy to assume that this insurance line has something to do with boating transportation. In fact, inland marine insurance can cover a variety of transportation exposures; however, it does not cover boating transportation, which is covered under ocean marine insurance. Inland marine is a specialized type of property insurance that primarily covers damage to or destruction of your business property while in transport. Inland marine also covers the liability exposure for the damage or destruction that may occur to property in your care, custody, or control during transport.
Covered Causes of Loss
Standard perils in Inland Marine may include fire, lightning, windstorm, flood, earthquake, landslide, theft, collision, derailment, overturn of the transporting vehicle, and bridge collapse.
Coverage Forms and/or Specialty Coverages
Inland marine has great flexibility in covering many potential transportation risks. Some of the most common types of coverage offered are accounts receivable insurance, consignment insurance, equipment floaters (i.e., contractors equipment), installation floaters, motor truck cargo insurance, trip transit insurance, and valuable papers (records) insurance. If you have questions regarding particular business, then contact your broker-agent for further information.
Boiler and Machinery
Boiler and machinery insurance can add an important layer to potential insurance coverage. Boiler and machinery insurance is currently marketed under such names as “systems protector,” “systems breakdown,” and “machinery breakdown” insurance. Boiler and machinery insurance covers business property, other property losses, and legal fees (if any) that may result from the malfunction of boilers and machinery. Boiler coverage includes covering the costs of inspection and often maintenance of boilers.
Machinery coverage can include many different types of machines used in retail, office and manufacturing settings. Machinery coverage also includes major machinery systems common to most commercial buildings, such as heating, ventilating and air conditioning systems. Since most commercial property policies exclude losses from boilers and machinery, it is important to be aware of any exposure your business may have and discuss it with your broker-agent.
Crime insurance provides protection for the assets of your business including merchandise for sale, real property, money and securities. It is considered a property insurance line. Based on the crime coverage that you purchase, it is possible to be covered for the following causes of loss: robbery, burglary, larceny, forgery, and embezzlement. Specialty coverage parts can be added based on need and exposure to loss such as mercantile open-stock, burglary insurance, mercantile robbery insurance, mercantile safe burglary insurance, money and securities broad form policy, office burglary and robbery insurance, and storekeepers burglary and robbery insurance.
Casualty insurance provides coverage primarily for the liability exposure of an individual, business or organization. Liability from the negligent acts and omissions of an individual, business or organization that causes bodily injury and/or property damage to a third party is the subject of casualty insurance coverage.
Commercial Automobile, Commercial General Liability, Commercial Umbrella, and Workers Compensation are the most common business casualty insurance lines. Commercial Automobile Coverage, Classification and Limits of Insurance Commercial automobile coverage is similar to the coverage you may carry on your personal auto; however, commercial automobile exposures can be more complex requiring specialty coverages to be considered based on the individual needs of your business. Basically, commercial automobile coverage can protect your company from any liability stemming from automobiles used in your business or any damage to the covered automobile.
A Business Auto Policy (BAP) has the flexibility to provide coverage for Small Business Guide to Commercial Insurance business, personal, non-owned, or hired autos based on the coverage purchased and applied to each scheduled auto. In other words, automobiles can be separately scheduled along with corresponding coverages. Coverage can differ by vehicle and a symbol or multiple symbols will designate the coverage assigned to a scheduled auto. These symbols are referred to as covered auto symbols and use a simple numerical system (1-13).
Automobiles are classified by weight (light, medium, heavy, extra heavy) and by type of use (private passenger, service, commercial). Unlike personal auto policies that separate bodily injury and property damage limits (split limits), BAPs commonly utilize a Combined Single Limit (CSL) for the limit of insurance. This creates higher insurance policy limits for both coverages, including per occurrence limits. Common commercial automobile CSLs are $500,000 or $1,000,000.
Commercial General Liability Coverage
One of the key concepts of liability coverage is that it is comprehensive in nature. What this means is that the policy (insuring agreement) covers all hazards within the scope of the insuring agreement that are not otherwise excluded. It is likewise comprehensive in that it provides automatic coverage for new locations and activities of your business, which come about after policy inception and throughout the policy term. Commercial General Liability (CGL) is the standard commercial liability policy used to insure businesses.
There are three primary coverage sections that make up a CGL policy: premises liability, products liability and completed operations.
Premises liability covers liability for accidental injury or property damage that results from either a condition on your premises or your operations in progress, whether on or away from your premises. A products liability hazard exists for any business that manufactures, sells, handles, or distributes goods or products. The hazard being the potential liability for bodily injury or property damage that arises out of your goods or products.
Completed operations covers your potential liability for bodily injury or property damage that arises out of your completed work. The major exclusions under a CGL policy include: intentional injury; insured contracts; liquor liability; workers compensation and employers liability; pollution; aircraft; automobile; watercraft; mobile equipment; war; care, custody, and control; damage to your work; impaired property; sister ship liability; and failure to perform. It is always important to read and understand all coverage exclusions; however, it is particularly critical in a liability policy. If you do not understand the coverage exclusions or limitations of the CGL policy, then contact your broker-agent and discuss completely until a working understanding is achieved.
Classification of Commercial Business Insurance
The type of business you run determines how a CGL policy is classified. Generally speaking, a specific code or codes (in some situations) are assigned based on exposures that are common to your type of business operation. The way a business risk is classified is the first step to determine premium and an important part to the rating formula.
Limits of Insurance
The CGL policy has separate limits of insurance for general liability, fire legal liability, products and completed operations liability, advertising and personal liability, and medical payments. An aggregate limit of liability is in force for the general liability, fire legal liability, advertising and personal liability, and medical payments claims. When total claims for all these areas exceed a stated annual aggregate limit of liability, the policy limits are exhausted and no more claims will be paid from the policy for the duration of the policy period. There is also a separate aggregate limit of liability in force for products and completed operations liability claims.
When a liability claim goes above the aggregate limit of liability, the policy limits are exhausted. By purchasing a commercial umbrella, you can protect your business from being liable for this excess liability judgment. A commercial umbrella covers the amount of loss above the limits of a basic liability policy. Commercial automobile, CGL, workers compensation, or any liability policy can be covered by a commercial umbrella. A commercial umbrella may also provide coverage if a basic liability policy is not in force. Also, commercial umbrellas can provide coverage for gaps in coverage under basic liability policies. When a commercial umbrella provides coverage for basic liability loss it does not pay the loss from the first dollar. It is common to have a Self-Insured Retention (SIR) amount of at least $10,000. SIR is similar to a deductible. If there is a commercial umbrella loss and there is no corresponding underlying policy in force, you must pay the first $10,000 of the loss before the umbrella policy responds.
When an employee suffers a work related injury or illness, workers compensation insurance steps in to provide benefits based on the type of illness or injury sustained. Workers compensation is based on a no-fault system, which means that an injured employee does not need to prove that the injury or illness was someone else’s fault in order to receive workers compensation benefits for an on-the-job injury or illness.
As an employer you are required under your state's Labor Code to provide workers compensation benefits for your employees. You can purchase workers compensation insurance from a licensed insurance company or through the State Compensation Insurance Fund (SCIF). Employers may also have the option to self-insure. Your broker-agent can assist you with purchasing workers compensation insurance from a licensed insurance company and can assist you with information on SCIF and self-insurance.
What Is a Business Owners Policy?
Designed specifically for small businesses, a Business Owners Policy (BOP) is a combination commercial policy that covers property, general liability and business interruption. It is written with strict underwriting guidelines including maximum allowable square footage for office, retail, or apartment risks. A BOP is most appropriate for small, “main street” businesses such as: hardware stores, barbershops, greeting card shops, accountant offices, or low-density apartment houses. Discuss the option of a BOP with your broker-agent, as the premium for qualifying businesses can be very competitive.
How Are Commercial Policies Rated, Deductibles Selected, and Premiums Developed?
The way a policy is rated determines how the policy premium is developed. Rating factors vary based on the line of insurance you are purchasing. If you are purchasing commercial property insurance, the building rating formula is based on factors including square footage, type of construction, sprinklered or non-sprinklered, and the fire protection classification.
If you are purchasing general liability insurance, the rating formula can be based on square footage, payroll, or gross sales depending on the general liability classification codes used. These are known as rating exposures. If the rating exposures are set too high by the insurance underwriter it will result in over-payments by your business to the big insurance company.
Once the rating exposures are identified and the deductibles selected (usually from information you have provided on the application), the premium is calculated by a simple formula: rate x exposure = premium. The insurance policy deductible amount you choose will be calculated into the rate.
The higher the deductible (the amount you choose to self-insure) the lower the rate. By utilizing higher deductibles, you can bring your premium cost down; however, you do not want to jeopardize your company’s financial future by choosing overly large deductibles. Speak with your broker-agent for the deductible options available to you when purchasing commercial insurance.
The basic rating equation most often utilizes other modification factors, which can include experience modifications, schedule rating, or judgment rating. Because rating formulas can range from simple to complex, depending on the line of insurance, it is important to discuss how your policy is rated and how the policy premium is calculated with your broker-agent.
What Do I Need to Know About Commercial Claims?
Depending on the type of loss your business experiences, the duties and responsibilities required by you in a claim can be numerous. It is important to remember that your broker-agent can assist you throughout the claims process. In many cases your broker-agent will be your first point of contact when filing an insurance claim. Whether you contact your broker-agent or the insurance company directly when filing a claim, you are required under the insurance contract to report all claims in a timely manner. This allows the insurance company to process the claim and conduct their investigation as quickly as possible.
Since commercial claims tend to be more complex, it is important for the company to assess the claim quickly in order to mitigate any situation that may have the potential for increased loss. This is especially crucial in liability claims, as there can be high dollar amounts at stake.
When claims are not controlled early in the claims process, litigation from third parties can arise. Litigation can be expensive and often ends in a judgment much higher than if an experienced claim representative had handled the claim from the beginning. This is why it is necessary to turn all claims over to your broker-agent or insurance company as soon as you are made aware of the claim. Trying to handle the claim yourself violates your duties under the insurance contract and can be costly to you in the long run.
Most business owners are aware that claims loss experience is reflected in the rating formula and directly affects premium costs. By following the duties outlined in your contract regarding claims, you are a partner with your insurance company in helping to keep claims costs to a minimum, which in turn helps keep your premium costs down. The better your claims experience, the greater modification allowed to lower your premium. When you first receive your policy, contact your broker-agent to discuss all the duties and responsibilities required by you under the contract.
The deductible on a commercial policy is the part of the loss that you pay up-front before your insurance company pays a claim. Based on the amount of the deductible as stated in your policy, the insurance company will pay up to the limits of the policy when a claim is covered after you have provided the deductible payment. The type of deductible utilized in a commercial policy is referred to as an “absolute dollar amount.” The higher the absolute dollar amount (deductible), the lower your premium.
One of the most effective ways to decrease the frequency and potential severity of claims is through loss prevention and control. Most commercial insurance companies have their own loss prevention departments; however, some insurers rely upon contracted loss prevention services. Usually loss control services are built into higher risk, higher premium accounts as a part of the entire package of insurance. If you are a small business owner, you can still benefit from proven loss control methods.
Based on your kind of business exposure, your insurance agent can offer suggestions on how to best control the loss exposures common to your business. The broker-agent along with your account underwriter, claims representative, and loss control representative can create an entire program of loss prevention that includes specific modifications and procedures to follow that can help create a safer workplace. These programs can even include an employee safety program incorporating awards and suggestions.
Getting your employees involved in loss control makes good business sense. Creating a safe work environment benefits everyone. When proven loss control methods are implemented, the public and workers are better protected, and your premium costs go down as your loss experience improves.
What If I Have Trouble Locating Insurance for My Business?
Most businesses will have no difficulty obtaining insurance in the standard insurance market with the assistance of a qualified broker-agent. However, if your business has experienced significant losses, your business is considered to be engaged in high-risk operations (with a greater chance of claims frequency or severity), or you have recently started your business, you may not be able to locate business insurance in the standard commercial insurance market. Your insurance broker can explain the options you may have in seeking and securing commercial business insurance quotes elsewhere.
Contact an Insurance Broker Who Specializes in Commercial Business Insurance to answer all your insurance questions and get your the right type of coverage and reasonable insurance quotes.