What are the most common types of small business commercial insurance? General liability, commercial property, business auto and workers compensation insurance top the list.
What Are The Most Common Types Of Small Business Commercial Insurance?
The way small business insurance works is quite simple. You pay a premium, which is just a payment, to an insurance company. In exchange, the company promises to pay for any claims you have in the future.
There is no universal policy for small businesses, and that's actually good because if a single policy covered everything that a business might face, the premium would be sky high! So, to help small business owners, insurance companies offer many different policies.
Your business might not need all the different types of small business insurance out there. However, when you think about the fact that about 43 percent of all small businesses have faced a lawsuit, you definitely can see the benefits of getting a commercial insurance policy.
So what are the most common types of small business commercial insurance? Here are some of the policies that most small business owners get:
- General Liability
- Business Owner's Policy
- Worker's Compensation
- Errors & Omissions aka Professional Liability
- Cyber Liability aka Data Breach
What Type of Insurance Policy Does Your Company Need?
Unfortunately, none of us can look into the future to predict what type of policies we might need. But, you can consider some of the potential complications you might encounter along the way. What are the most common types of small business commercial insurance? One way to do this is to look at each category, closely. You can also check out what kind of insurance do you need for a small business?
Client&Customer Risk Policies
You need your customers - but interacting with them also puts you at risk of getting sued. Estimates for the average cost of a liability lawsuit for a business is about $54,000. Business insurance, of course, helps you to manage that cost. Here are some scenarios you might find your company in:
- A Customer Falls On Your Property - If a customer falls on your property, you are liable, and general liability policy can help you pay for the medical costs and the lawsuit if you are sued.
- A Client Loses Money After You Give Professional Advice - Errors and omissions insurance also know as professional liability (E&O) can pay if a client accuses you of making mistakes in your work that caused them to lose money.
- An Employee's Mistake Exposes A Client's Financial Info. - In this case, cyber liability insurance can help cover your business, assuming that the information was lost due to an employee's mistake, such as losing their laptop with sensitive information on it.
- A Patron Drinks Too Much At A Bar - If you or your staff overserve a patron at a bar, and they cause damage or injuries, you could be held liable. In this case, liquor liability insurance helps to alleviate the financial impact you might face.
It's not always easy to see what one policy covers versus another, but an insurance professional can help give you more clarification.
Employee Risk Policies
Your employees are extremely important for the success of your business, but the more people you hire, the more risk you take on. Even something relatively simple, like an accusation of violating one of your employee's rights, could easily set you back from $8,000 to $30,000 on average. Here are some more scenarios that you might find yourself in:
- Your Employee Gets Injured On The Job - Yes, some industries are safer than others, but every employer is at risk for an employee getting hurt while on the job. So, almost every state requires workers comp to cover it.
- Your Employee Sues You For Discrimination - In this case, employment practices liability insurance (EPLI) can help cover any discrimination charges.
- You Have A Board Of Directors - If you have a non-profit that has a board of directors, it's a good idea to get directors and officers liability, or D&O, insurance. This helps to cover any disputes about the decisions the board makes.
Property Risk Policies
You have to protect your property, too. What are the most common types of small business commercial insurance? According to research, the cost of a fire is, on average, $35,000 for a small business. Most small business owners don't have that just ready for the taking, so this is where commercial property insurance can be quite helpful. It also helps cover you during inclement weather disasters, theft, and burglary. You can also choose a business owner's policy that bundles both property and general liability insurance, to give yourself and your business more protection.
Vehicle Risk Policies
If you have vehicles as part of your business, you might be confused about what type of coverage is necessary. Many small business owners believe that they can drive their own cars because they have insurance on them. This isn't true, though. According to studies, the average cost to a small business that has a vehicle claim is $45,000. Again, you probably don't just have that lying around. If you fit into these categories, you should definitely consider vehicle insurance for your business:
- You Drive A Company-Owned Vehicle - It doesn't matter if you have a single car, truck, or van, or a fleet, if you have a vehicle registered in the name of your company, you have to have commercial auto insurance.
- You Rent Vehicles Or Ask Your Staff To Use Their Cars For Work Errands - If you send an employee out to do something for work, and they drive their own vehicle, you could be liable if they get in an accident. Same if your business rents vehicles. Here hired & non-owned auto can help.
How Much Does Insurance for a Small Business Cost?
You are probably wondering how much you will spend on a plan like this. Well, it depends. We understand that you probably want a solid answer, but there are a lot of variables. Here are some of the factors that go into your premium.
- Policy Limits - more coverage = more premium.
- Deductible - higher deductible = lower premium.
- Business Size - more employees = more revenue and more payroll = more premium.
- Industry - higher risk industries = more premium. (roofers cost more than CPAs)
- Location - higher risk zip codes = more premium. (think crime rates, fires, mudslides etc.)
- Claims History - more claims = more premium
- Insurance Company - different companies have different rates. (that is why you should get a good broker who can shop for you)
What Are The Most Common Types Of Small Business Commercial Insurance? - The Bottom Line
We hope this article on what are the most common types of small business commercial insurance? was informative. Don't get stuck paying for legal bills out-of-pocket. Find the right commercial insurance policies that can protect you and your business.