Every new business and every small business needs to have commercial insurance, even if your business only has a few employees. Commercial insurance covers the business against the risk of loss by providing protection from fire, weather events, lawsuits, employee injuries, and many other types of insurance losses. The insurance premium is often a small price to pay to protect the business from an event that could wipe out a business without insurance.
Commercial insurance is broken down into three categories: property, liability and workers compensation. The small business needs coverage in all three areas. Each of the three categories can have variable types of insurance that can be tailored to the needs of the business. See our Buyer's Guide to WC Insurance Coverage. [WCx]
Property
Many new business owners think of property insurance as protection from fire and flood, but property insurance can be much more than that. There are two basic areas of property insurance. The first area is real estate insurance to cover a business’ buildings. The second area is personal property insurance to cover non-real estate property. Non-real estate property insurance can provide coverage for equipment, inventory, cargo and other owned property.
The property insurance can be tailored to provide protection from business interruption, crime, equipment breakdown, glass breakage, debris removal and any other type of property loss specific to your business. Property insurance will also include fidelity and surety bonds.
Liability
Liability insurance will protect the small business from claims brought against it by others. Liability insurance provides protection from customers who bring claims and from other non-business related third parties. The liability insurance on a small business building can provide it from customers who are injured on the property, for instance a customer who slips and falls while in a store. Liability insurance can provide protection for the small business if one of its products causes an injury due to a defect in the product. Liability insurance also includes vehicle insurance in case a delivery truck is involved in an accident due to the carelessness of the driver.
There are various types of specialty liability insurance. Lawyers, appraisers, consultants, or anyone whose business is to provide advice and guidance will need Errors and Omissions insurance. Doctors, druggists and all other types of medical providers need Medical Malpractice insurance. If the business is formed as a corporation, the directors and officers will need Directors and Officers liability coverage to protect them from lawsuits over the decisions they make.
Workers Compensation
Almost every employer needs workers compensation insurance to protect the business from the cost of injuries incurred by employees while on the job. Only the very smallest of businesses (1 up to 5 employees which varies by state) are exempt from the requirement to have workers compensation insurance. Even if a very small business is exempt from carrying workers comp coverage, it is still a good idea to have workers compensation insurance. See our WC 101 for more information.
The workers compensation insurance pays for all the medical care of the injured employee, and replaces a portion of the employee’s lost income if the employee is unable to work due to his/her injury. If a small business does not have workers’ compensation coverage, the business and in some cases the individual business owner, is liable for all cost of an employee’s injury and can be sued for those costs.
The Commercial Insurance Policy
The commercial insurance policy normally contains four parts: 1) identification of the exposures or items insured, 2) the premium cost, 3) the conditions and exclusions of the policy, and 4) how claims will be paid. Upon receipt of the insurance policy, the business owner should carefully review the policy, imagine every possible thing that can go wrong and verify there are provisions in the commercial insurance policy to cover those events. If the commercial insurance policy does not cover an exposure to loss that the business owner is aware of, the insurance broker should be contacted and those concerns addressed by the broker.
Prior to purchasing the commercial insurance policy, the new business owner should contact an insurance broker or agent to review the nature and type of the business. By reviewing your insurance needs, this professional will be able to provide an insurance policy that meets all your needs. [WCx]
Author Rebecca Shafer, JD, President of Amaxx Risk Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker, and publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality, and manufacturing. She is the author of the #1 selling book on cost containment, Workers Compensation Management Program: Reduce Costs 20% to 50%. Contact: [email protected].
WORKERS COMP MANAGEMENT MANUAL: www.WCManual.com
MODIFIED DUTY CALCULATOR: www.LowerWC.com/transitional-duty-cost-calculator.php
Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers comp issues.
©2012 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact us at: [email protected].
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