A Layman’s Guide to Commercial Insurance Coverage

A Layman’s Guide to Commercial Insurance Coverage

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While your business may already carry some basic coverages, gaps in your commercial insurance program can leave you vulnerable to costly claims.


Read on to learn what commercial insurance is, the types of commercial insurance policies, and which coverages are critical for your specific operations and exposures. With FR Law Group as your guide, you can implement a comprehensive risk management strategy to protect everything you have worked hard to build.


What Is Commercial Insurance?


Commercial insurance protects businesses and organizations from losses resulting from events that can disrupt operations or lead to legal issues. In general, commercial insurance covers losses from bodily injury, property damage, and data breaches, among several others. Without coverage, you would need to pay out of pocket for expensive claims.


What Are the Common Types of Commercial Insurance Policies?


The different types of commercial insurance coverage include but are not limited to:


1. Commercial Property Insurance


Property insurance provides coverage for buildings, machinery, tools, and inventory in case of loss or damage from break-ins (theft or vandalism), fires, or natural disasters. This policy covers business interruptions and reimburses the money needed to repair or replace damaged property.


2. General Liability Insurance


General liability insurance covers costs arising from injuries or property damage to third parties. It protects organizations from expenses associated with legal claims due to negligence (e.g., a customer sustains an injury at your business premises due to something your employees did or failed to do).


Liability insurance covers medical expenses, legal fees, and settlements. This policy also covers “advertising injury,” which includes offenses like libel or copyright infringement.


3. Professional Liability Insurance


Professional liability insurance, also referred to as errors and omissions (E&O) insurance, covers claims from service-related mistakes or negligence. Organizations providing services for a fee should purchase errors and omissions insurance, which protects against circumstances that conventional business liability insurance does not. In particular, if your company employs broker-dealers, lawyers, real estate agents, insurers, architects, engineers, accountants, medical specialists, consultants, and counselors, consider investing in E&O insurance.


4. Commercial Auto Insurance


Commercial auto insurance covers cars, motorbikes, trucks, and other vehicles used for business purposes. This coverage can help pay for damages and medical expenses from minor collisions to fatal accidents. In most states, businesses that own or rely on vehicles to operate require this policy.


5. Data Breach Insurance


As more businesses depend on technology to store sensitive data, the possibility for cybercriminals to target frailties in an organization’s security systems has grown substantially. If conglomerates like Yahoo, Microsoft, and Facebook can encounter data breaches, so can smaller businesses.


Data breach insurance, also called cyber insurance, safeguards against the aftermath of lost or stolen information. This policy also covers the costs of notifying impacted individuals and may offer credit monitoring assistance.


6. Workers Compensation Insurance


Without a workers’ compensation policy, damages for illnesses and injuries incurred at work can cost your business thousands (or even millions) of dollars. This gap in your insurance program exposes you to punitive damages, daunting lawsuits, and overwhelming medical bills.


Excluding Texas, 49 U.S. states mandate companies with a certain number of employees to buy this type of commercial insurance policy. It covers medical expenses and income disruptions for workers who contract occupational diseases (e.g., respiratory conditions from toxic chemical exposure) or suffer injuries (e.g., sprains and strains from excessive physical labor).


Should you purchase workers’ compensation insurance? Find out here.


7. Business Income Insurance


Business income insurance, or business interruption insurance, compensates lost income from paused operations due to covered property damage. For example, if you need to shut down your factory due to flooding from a recent monsoon, this policy covers your lost income until you can resume operations. It throws a lifebuoy for your business to stay afloat, helping to cover expenses such as payroll and monthly bills.


8. Business Owner’s Policy (BOP)


A BOP combines property insurance, general liability coverage, and business income insurance into one policy. It covers a broad range of risks to your organization and commercial property.


9. Employment Practices Liability Insurance (EPLI)


If your business relies on manpower, employment practices liability insurance (EPLI) safeguards against lawsuits alleging the violation of employee rights. Non-compliance with an employee’s legal rights, even if unintentional, can have severe ramifications. These consequences include hefty fines, damage to your company’s reputation, and the potential closure of your business.


EPLI generally covers legal defense fees and settlement costs up to the policy limits, regardless of whether the employer settles, wins, or loses the case. All businesses – irrespective of size, with workers, vendors, or customers – should buy this coverage. Remember, every employer is susceptible to lawsuits from past, present, and future staff members.


10. Commercial Crime Insurance


Commercial crime insurance protects against internal and external theft or misappropriation of funds, securities, and other assets. Coverage encompasses risks like employee embezzlement, cybercrime including fraudulent fund transfers, impersonation of the company or its agents, and third-party liability for loss or damage to clients’ property.


This policy is relevant to any non-financial commercial entity. Financial institutions have similar coverage under financial institution bonds.


Who Needs Commercial Insurance Solutions?


Most businesses, small or large, require commercial insurance to help cover expenses linked to property damage and liability claims that can randomly occur on any day of the week. Should an unforeseen mishap or legal proceeding arise without such protection, the financial consequences could be catastrophic, especially for small businesses.


Why Should You Hire a Commercial Insurance Lawyer?


Consulting our commercial insurance lawyers can help protect your business from costly legal claims and risks. We can review your current insurance policies and advise whether they provide adequate coverage for your needs.


In addition, our experienced commercial insurance attorneys can check the facts surrounding a denied or delayed claim to identify grounds for a bad-faith lawsuit. We can assess the insurance policy and any relevant correspondence to see if the insurer’s actions contradict the policy terms or industry standards. If a valid bad faith claim exists, FR Law Group can file suit against the insurance company on your behalf, seeking payment of the denied claim as well as damages for economic losses and attorney fees.

As leading commercial insurance lawyers in Phoenix, Arizona, we can evaluate your needs and propose the right insurance policies and coverage amounts. Our team can also uncover gaps in your existing policies and help close them. Moreover, since insurers are notorious for delaying and denying claims, we can help your business receive compensation for covered losses. Contact us now for legal advice or representation.