So you own a business that you have worked very hard to start and get off the ground. You have put your heart and soul into getting and keeping your customers as well. The question you may now be facing is what kind of insurance policy do you need to protect what you have worked so hard on.
Maybe you aren’t concerned with any personal liability that could potentially cause you to go out of business, but instead you need a certain commercial policy to satisfy a contract that you are trying to get. Maybe this contract requires you to have a certificate of insurance proving you have a certain commercial policy. There are many different kinds of business insurance that are available for your protection. I would like to focus on some of the most common insurance types for your business and define them. Hopefully this will give you some idea of what is covered for each policy and help you to decide whether it is a business policy that is right for you. I will be touching on just some of the finer points of each business policy type. Please feel free to respond to this blog with any questions you may have or contact me directly at 704-494-9495.
General Liability- General liability is the most common form of commercial insurance. This is due to the fact that it is also the most commonly requested policy when doing work for a contractor. A general liability policy will cover the company’s assets in the event of being sued from bodily injury or property damage due to the negligence of a business. A general liability policy will also cover you for defense in a suit since you don’t have to be at fault just to be sued.
Workers Compensation- Workers compensation is the second most common type of commercial insurance. This policy pays for any bodily injury to an employee while he is on the job. It also will pay any lost wages due to that employee having to be out of work because of an on-the-job injury. A workers comp policy premium is determined by the total payroll each year and also takes in consideration the type of work that is being done. In this case a roofer will pay more for workers compensation than most businesses that take place in an office enviroment because of the difference in risk level. A workers compensation policy must be audited each year based on that particular year’s exact payroll.
Errors and Omissions or Professional Liability- Errors and omissions or professional liability policies cover your business against claims made by customers who hold you responsible for errors made or failure to perform a duty. This policy will pay your defense costs even against baseless claims so that you are not responsible for financially defending yourself. These policies are essential for consultants, brokers, lawyers, agents, or medical professionals.
Commercial Auto- Commercial auto policies cover any liability or physical damage to the insured’s vehicle while being used for business use. Companies will take into consideration what the vehicle is being used for and the radius that the vehicle is being driven.
Business Personal Property- Business personal property covers any items that are owned by the business and used for business purposes. This can include everything from desks, chairs, computers, tools, ladders, lawn mowers, etc. It is important to add this coverage to make sure that you are covered in the event of a fire, theft, or any other type of covered loss. Most standard homeowners policies will not cover these types of items used in a business.
Tools and Equipment/Contractors Equipment- Tools and equipment coverage or contractor’s equipment coverage covers losses to these items due to theft, fire, etc. This type of policy is similar to business personal property coverage except these items are usually scheduled specifically on the policy and most often carry higher values. Common types of contractor’s equipment would include bulldozers, backhoes, fork lifts, and loaders.
Liquor Liability- Liquor liability is the type of policy held by restaurants and bars that covers suits that arise from alcohol related claims. It is very important to know that a standard general liability policy will not cover these types of losses. A separate liquor liability policy must be purchased to make sure you are covered. If your business sells, serves, or makes alcohol than you should purchase this type of policy. Assault and battery is an add-on endorsement to this policy type and covers claims that arise out of injuries from fights especially where employees or bouncers are concerned.
Umbrella or Excess Liability- An umbrella policy, also known as an excess policy, covers any excess liability that extends beyond that of your other commercial policy limits. In order to have this policy you must carry certain limits of liability on your underlying policies. Most commonly $2,000,000 aggregate and $1,000,000 per occurrence for your general liability policy and $500,000 for workers compensation. This policy gives you further protection where your other policies leave off.
Employment Practices Liability (EPLI)- EPLI insurance covers an employee’s claims made against a business for unfair and illegal practices. Some of the most common types of claims made against this policy type would be wrongful termination, sexual harassment, discrimination, wage and hours claims, libel, slander, defamation of character, and breach of contract.
Crime/Fidelity- Crime or fidelity policies cover the business for loss of money, security, or property due to a loss where crime is involved. This can include employee theft, embezzlement, or fraud.
Hopefully this helps shed a little light on the different types of commercial policies that you can purchase to protect your business. There are other policies available as well but these are some of the most common. I understand that commercial policies can sometimes be expensive and therefore effect your profit margin but you must take a serious look at what some of these policies provide and decide whether they are right for your business. It only takes one perilous event to put you out of business for a long time or for good. Please let me know if I can go into further detail on any of the above policy types.