What is Commercial Insurance?
Commercial insurance, also known as business insurance, is a safety net to be used in the worst case scenario. Business owners use this insurance to protect their assets from financial losses as a result of accidents, property damage, product or service liability, and other difficult and costly problems.
Many small business owners think they might not need Commercial Insurance, at least initially.
Sorry to break it to you…
If you’re like them, you are asking for trouble.
Small businesses are more affected by financial crises than larger companies. They are also more vulnerable to strong shifts in market trends.
Even if you think you have the “best small business in the world” and nothing could happen to it, you’ll still take a huge hit if only a small percentage of your customer base stops buying your products or using your services.
Fortunately, there are many types commercial insurance policies for every business and situation you can imagine. As your business develops, you will have to figure out which commercial insurance coverage is right for situation at that time. More business comes with a higher risk of accidents, lawsuits, and other events which can cost your company more time and more money, potentially leading to utter ruin.
Below, you will find over 91 up-to-date and relevant facts about the different types of insurance, the Commercial Insurance industry, demographics, the common insurance claims business’s make, preventative measures you can take to reduce your risk, FAQs about business insurance, and more.
14 Types of Business Insurance
This general outline of the different commercial policies allows you to easily compare coverage and determine which are relevant to your situation.
If you run a business, odds are you will use at least one of the policies mentioned in this list.
1. General Liability Insurance
Business liability insurance provides broad coverage. Protects from claims made against damages caused during business operations. Protects against properties rented by your firm, medical claims, legal injuries. Mandatory. Without general liability insurance it is going to be harder to get clients and grow your business. Protects from claims brought against damages caused to others. Business liability insurance does not cover damages made within your company.
2. Commercial Property Insurance
Real Estate Protection If you own or lease real estate or equipment, Commercial Property Insurance protects your investments from catastrophic events like fires and storms. You should consider this insurance if you run a business from home. Don’t rely on home insurance alone. Business property is not covered by home insurance. Consider getting separate property insurance for especially valuable property. If renting, you will need renters insurance to protect from damage caused by tenants.
3. Commercial Auto Insurance
Company Vehicle Protection The protection of commercial auto insurance is limited to company vehicles used on a daily basis.
4. Workers Compensation Insurance
Employee Protection Consider getting Workers Compensation Insurance if you have employees and you want protection from claims made against damages caused to employees. Many states make workers comp insurance an essential requirement to having employees in the first place.
5. Professional Liability Insurance
Protects The Services You Provide If you provide specialized services, adding professional liability insurance protects you from claims made against damages caused to clients. You risk losing your business without this policy.
6. Product Liability Insurance
Protects The Products You Provide If you provide a product, you need to get product liability insurance if you want protection made by claims made against damages caused by the quality or function of what you sell.
7. Business Owner’s Policy
Package Deal This insurance is a package customized for your business. Most insurance providers offer Business Owner Policy bundles or BOP’s. These allow you to save money by combining the types of insurance you need.
8. Commercial Umbrella Insurance
Extra Protection Commercial Umbrella Insurance gives you extra coverage over incidents not fully insured by the other insurance policies you own.
9. Cyber Liability insurance
Online Businesses and Virtual Property Protection Doing business virtually using the internet comes with a risk of hacks and data breaches. Protect yourself from claims made against damages caused by data leaks.
10. Business Crime Insurance
Protection from Criminal Mischief Property insurance does not cover damages caused by criminal activity like loses due to fraud and theft. Crime Insurance allows you to get protection for specific crimes which may apply to you.
11. Equipment Breakdown Insurance
Equipment and Machinery Protection It’s important to protect equipment essential to the operation of your business. Equipment Breakdown Insurance can be purchased on its own or used in a bundle to supplement a policy you already have for your company. This insurance covers claims made against damages caused by equipment failure.
Supplementary Insurance Policies
The following insurance plans can only be added to an existing policy:
12. Accounts Receivable Insurance
If you lose the ability to bill clients due to lost or damage of receipts or other billing data, Accounts Receivable Insurance gives you an added layer of protection and mitigates the financial losses of such an event.
13. Business Interruption insurance
Business Income insurance, or business interruption insurance, protects your company from losses stemming from temporary closures due to natural disasters and similar events.
14. Business Crime Insurance and Equipment Breakdown Insurance
Although you have the option of getting business crime insurance or equipment breakdown insurance by themselves, you can also choose to use them as add-ons to supplement an existing policy you own.
The goal is to get maximum coverage and protection at a minimal cost to your company. In life it is impossible to completely avoid risk. Thankfully insurance policies, like the ones listed here, are available to help you further reduce your risk for common situations you may encounter depending on your business model and location.
11 Facts About the Business Insurance Industry in the United States
Insurance providers protect the economic system from total collapse by taking the weight of inherent risks off the shoulders of businesses.
1. According to the United States Census Bureau, there were 27,104,006 active businesses in US in 2019 and the number is constantly growing! Of those 27 million, 8 million fall into the category of small businesses.
2. In the United States, all direct insurance policies combined made up a total of 7.565702 trillion dollars in 2020.
3. Insurance spending (7.57T) in the US for 2020 accounts for 9.447% of the total GDP.
4. Based on 2020 data, the US accounts for 56.2% of the market share in the OECD for all insurance spending.
The OCED is the Organization for Economic Co-Operation and Development. They work to actively improve the world by creating standards and solutions and for social, economic, and environmental challenges. They do this by using data and analysis to help form policies and set international standards.
5. Commercial Insurance premiums made up 50.2% of all Property and Casualty insurance premiums written in the United States in 2021. The remaining 49.8% consists of personal lines of auto and homeowners insurance.
6. $359,600,000,000 ($359.6 Billion) was spent on Commercial Insurance premiums in 2021, where as $356.3 Billion was spent on Personal insurance.
7. Of the Commercial Insurance lines, there was a total of $184,908,130,000 in losses incurred in 2021 alone.
8. Of the $1.3516 Trillion spent on insurance premiums in 2021, over half 53% was on Property and Casualty insurance. This comes out to $715.9 Billion going to Property and Casualty insurance. The other $635.7 Billion went towards Life and Annuity insurance, making up the other 47%.
9. During 2021, there were 1,566,900 insurance carriers operating in the US. 628,600 (40.12%) specialized in Property and Casualty insurance. The rest of the insurance carriers fall into the categories of Life and Health 911,400 (58.16%) and Reinsurers 26,900 (1.72%).
10. Unfortunately, not all the small businesses who needed insurance actually had any. An AdvisorSmith study from 2020 on small business insurance claims in the United States revealed only 66.0% of those companies surveyed carried insurance coverage.
11. Great Places To Work conducted a survey of the Fortune 100 Best Companies to Work for in 2022. Of those hundred, 5 happen to be insurance providers. Namely:
- Nationwide Mutual Insurance Company
- The Progressive Corporation
- Allianz Life Insurance Company of North America
- Mutual of Omaha
- Farmers Insurance
5 Facts About Business Insurance Demographics
1. When it comes to insurance agents in the United States…
- 81.5% are white,
- 11.8% are black or African American,
- 4.1% are asian,
- and 16.5% are hispanic or latino.
2. In 2021, women made up 50% of the 600,000 insurance sales agents in the United States. This is makes the insurance agent industry one of the most gender neutral occupations. It’s actually higher than the 46.8% of women who make up the U.S. workforce for all occupations. What’s even crazier is, women account for a whopping 84.7% of all insurance claims and policy processing clerks in the United States.
3. Younger business owners (aged 18 to 44) are significantly more likely to carry some form of commercial insurance as opposed to business owners 45 years old and older. Based on the data presented below, young owners are TWICE as likely to carry business insurance.
| Age of Business Owners | Percentage Carrying Business Insurance |
|---|---|
| 18-25 | 66.7% |
| 25-34 | 71.4 |
| 35-44 | 76.8% |
| 45-54 | 38.9% |
| 55 and Up | 33.3% |
Dr. Robert Hartwig, co-director of the Risk and Uncertainty Management Center at University of South Carolina’s Darla School of Business, gives two possible reasons why the younger generation is 2x as likely to have business insurance than their elders:
“…Young business owners may be borrowing to start up their business. If so, their mortgage lender will require them to carry commercial property insurance and perhaps other types of insurance as well.” “Young business owners—who may have invested the majority (or entirety) of their assets into a new business—understand that a failure to protect their investment with insurance could easily lead to financial ruin.”
4. 55.8% of small businesses in the AdvisorSmith survey said they filed an insurance claim in 2020. This is especially interesting considering the fact that 76.2% of businesses said they dealt with an insurable situation during the same year.
So what happened to the other 20.4% of business who didn’t file a claim?
Odds are they decided to forgo the paperwork involved in submitting a claim to their insurance provider. By paying claims out of the company’s pocket, some people can end up saving the business money because their premiums won’t increase. It also gets rid of worries about whether or not the insurance police will fully cover the insurable incident.
5. Compared to their male counterparts, female business owners were less likely to file an insurance claim even though men and women share similar rates for carrying Commercial insurance (67.8% and 63.2%, respectively).
- 40.4% of female business owners who took the survey reported filing a claim in 2020
- 65.6% of the males surveyed said they filed a claim in 2020
Here’s what Dr. Hartwig, had to say about the fact women submit fewer claims than men:
“Insurance pricing is based, fundamentally, on the frequency and severity of claims made by policyholders. Women, in general, tend to exhibit more caution than men—which in turn can lead to fewer claims. For example, women are less likely to file automobile claims.”
20 Facts about Business Insurance Claims
Commercial insurance policies, otherwise known as business insurance, protect business owners and the economic structure of the United States from the inherent risk of running a business.
Over 7 million small businesses rely on commercial insurance to allow them to continue operating and protect them in the unfortunate event a business is involved in a costly accident or is damaged by something out of their control. Many businesses have been financially ruined by such incidents.
1. For every 10 small businesses, 4 of them are likely to file a Property or General Liability insurance claim within their first 10 years of operating, based on statistics from The Hartford.
2. 3 out of 4 small businesses faced a situation in 2020 where they either could have used or did use a commercial insurance policy. Based on AdvisorSmith’s April 2021 study 76.2% of the 1000 small companies surveyed dealt with circumstances where they would have implemented business insurance. On the other hand, 23.8% of businesses surveyed were fortunate enough to not have to deal with an incident where insurance would have been necessary.
3. The most common claim small businesses make is burglary and theft, but that’s not the highest -priced claim businesses are likely to make. The most expensive claims fall into the category of reputational harm. This includes damages coming from offenses like slander, libel, and invasion of privacy. SOURCE: https://newsroom.thehartford.com/newsroom-home/news-releases/news-releases-details/2015/The-Hartford-Reports-More-Than-40-Percent-Of-Small-Businesses-Will-Experience-A-Claim-In-The-Next-10-Years/default.aspx (March 30 2015)
4. Here is a breakdown of the “10 Most Likely Property and Liability Insurance Claims Small Businesses Made from 2010 to 2014”
| Most Common | Percentage of Total Claim |
|---|---|
| Burglary and Theft | 20% |
| Water and Freezing Damage | 15% |
| Wind and Hail Damage, most notably to the roof or signs | 15% |
| Fire | 10% |
| Customer Slip and Fall | 10% |
| Customer Injury and Damage | <5% |
| Product Liability | <5% |
| Struck By Object | <5% |
| Reputational Harm | <5% |
| Vehicle Accident | <5% |
5. Based on The Hartford’s data from 2010 to 2014, which includes over 1 million business insurance policies, 1/5 businesses faced incidents of burglary and theft. In reality, burglary and theft claims averaged $8,000 in damages. This may seem like a lot at first glance, but when you compare it to the average reputational harm claim of $50,000 it seems pretty reasonable. When reputational harm claim is filed through a General Liability policy, the average cost climbs to over $75,000.
6. For your convenience, here’s a deeper look at the average cost of the “10 Most Expensive Property and Liability Insurance Claims for Small Businesses (2010 - 2014)”
| Most Expensive | Average Cost of Claim (Costs increase if lawsuits are involved) |
|---|---|
| Reputational Harm | $50,000 |
| Vehicle Accident | $45,000 |
| Fire | $35,000 |
| Product Liability | $35,000 |
| Customer injury or damage | $30,000 |
| Wind and Hail Damage | $26,000 |
| Customer Slip and Fall | $20,000 |
| Water and Freezing Damage | $17,000 |
| Struck By Object | $10,000 |
| Burglary and Theft | $8,000 |
7. For a more recent breakdown of the most common situations 1000 small business faced in 2020. A few of the businesses who participated in the survey actually reported multiple insurable events. Check out the results:
| Event | Percentage of reports | Corresponding Insurance |
|---|---|---|
| Crimes (Burglary, theft, fraud) | 32.0% | Commercial Crime Insurance protects businesses from financial losses due to crimes like burglary, theft, fraud. |
| Employee Injuries | 31.3% | Workers’ Compensation Insurance helps businesses cover the bill for employees injured on the job. This insurance also helps a business provide paid leave to employees who get sick and can’t come in to work. |
| Customer and Client Disagreements | 28.6% | Professional Liability Insurance helps a business mitigate court and lawyer fees as well as the compensation owed for damages caused by the dispute. |
| Digital Security Breaches | 27.9% | Cyber Liability Insurance protects businesses from losses stemming from hacks, viruses, denial of service attacks, and other digital security system malfunctions. |
| Employee Discrimination or Harassment | 27.2% | Employment Practices Liability Insurance provides a business coverage in the event a past, present, or future employee files a lawsuit based on claims of discrimination, harassment, or similar concerns. |
| Property Damage (Fire and Natural Disasters) | 26.5% | Commercial Property Insurance reduces the losses a business experiences from damage to physical property caused by fires, floods, and other natural disasters. |
| Accidents Involving a Company Vehicle | 25.9% | Commercial Auto Insurance covers property damage and liability claims concerning company vehicles. |
| Injuries or Damages Caused by Product Quality or Function | 24.5% | Product Liability Insurance provides coverage in the event damage is caused by a business’s product. This insurance is effective in cases of bodily damage or injury as well as damage to physical property or assets. |
| Customer Injury and Property Damage | 23.1% | General Liability Insurance protects a business in the event customers or another third-party files a lawsuit claiming bodily damage and injury or damage to physical property. |
The following statistics are grouped according to their position in the above chart.
8. The Frankenmuth Insurance Company said their most common business claims have been from cases of burglary and theft. As a matter of fact 42% of inventory losses accounted for in the US were by company employees. To fully protect your business from the types of losses caused by theft and burglary you would need a commercial property insurance plan and then supplement it with a crime endorsement and employee theft insurance. Some of the other more common business insurance claims where caused by water, wind and hail, fire, and customer slips or falls.
9. The Coalition Against Insurance Fraud released a 2022 report on “The Impact of Insurance Fraud on the U.S. Economy”. They stated in this report that insurance fraud cost the U.S. $308.6 Billion in 2022 alone.
10. In 2020 47% of Americans experienced financial data theft. From 2020 to 2021, data security breaches increased by 68%.
11. Based on the FBI’s 2021 Internet Crime Report, there were 847,376 cyber crimes reported by the public. That is a 7% increase from 2020. These cyber crimes caused a total of $18.7 Billion in damages and losses.
12. According to the Hiscox’s Cyber Readiness Report for 2022, cyber attacks increased by 80% for American Businesses. Attacks have increased from 2021 by 7%. 34% of US businesses have a cyber specific insurance policy. 64% of businesses have either a standalone cyber insurance policy or have added one to an existing policy. The median cost of a cyber attack in the US for 2022 was $18,800 with the highest cost of a cyber attack being around $2,000,000. Compare this to worldwide cyber attack statistics where the average cost was just under $17,000, with an increase of 29% in the year before. 1 out of 5 businesses which had a cyber attack said the survival of their business was seriously threatened.
13. In 2014, $23.6 Billion was spent on all types of fire insurance in the US. This is 7.2% of all fire costs for 2014 which is estimated to be around $328.5 Billion.
14. Approximately 10% of small businesses between 2010 and 2014 filed an insurance claim due to a fire with the average cost coming out to around $35,000.
15. There were 28 large-loss fires and explosions in 2020. Fires and explosions are considered Large-loss when they cause $10 Million or more in property damage. This year alone amounted to 8.1 Billion in damages. Of these 28,
- 10 caused damages exceeding $20 million.
- 3 caused over $100 million in damages on their own. They were a wild-land fire, a Navy ship fire, and one very large warehouse. These three fires on their own contributed to 7.5 Billion in total damages.
- 23 involved structures and resulted in $822.6 million worth of property loss.
- The other 5 non-structural fires caused $7.2Billion in damages. They consisted of three wild-land/urban interface fires, one vehicle fire, and one fire involving a storage area outside of a structure.
16. According to the NFPA, firefighters responded to a structural fire in the US every 65 seconds in 2021. Of the 1,353,500 fires responded to in 2021, there were $15.9 Billion in Property damages.
17. Non-residential structural fires increased 13.1% between 2020 and 2021. This means there were $834,208,210 worth of fire damages caused to properties and structures used for mercantile or business purposes.
18. The average settlement for personal injury caused by product liability in 2020 was $7,058,106. The average settlement for personal injury caused by general business negligence was $3,110,297.
19. The average personal injury lawsuit in 2020 was a whopping $2,448,978. The lowest amount awarded for a personal injury lawsuit in 2020 was only $840 but the highest amount paid was $373,763,109. Crazy!
20. According to The Hartford’s data, 35% of all General Liability insurance claims ended in a lawsuit.
13 Statistics about Commercial Insurance Trends
Business insurance preferences have shifted drastically in the last 5 years. The world has seen the fallout of Covid-19, complete supply chain collapses, cyber security breaches, natural weather disasters, sexual-harassment cases, drug overdoses, a full on war break out between Russia and Ukraine, and many more “breaking-news” events.
Based on these recent developments, the types of insurance policies small businesses need continues to shift as technology advances and business seek new ways to better fulfill their customers’ needs and desires.
1. With the increasing uncertainty and rapid developments we are seeing in the world, 74.1% of the 1000 business owners who participated in the AdvisorSmith 2020 survey said they planned on either making a first time purchase of Commercial Insurance or increasing their existing business coverage.
2. Without the right coverage, the 8 million small businesses in the U.S. could be completely decimated by the slightest legal claim or natural disaster. The price of commercial insurance premiums has been steadily increasing over the past few years and it’s not looking on slowing down any time soon.
| Year | Cost of Commercial Insurance Premiums | Percent Increase |
|---|---|---|
| 2017 | $253,200,000,000 | |
| 2018 | $287,100,000,000 | 13.4% Increase |
| 2019 | $299,300,000,000 | 4.25%increase |
| 2020 | $314,700,000,000 | 5.15% increase |
| 2021 | $359,600,000,000 | 14.3% increase |
3. Let’s not forget, if an accident happens to an employee while on the clock, on company property, or while using company equipment, the business is held responsible for paying reparations. Historically, the annual amount of claimed losses has been on the rise.
| Year | Cost of Incurred Commercial Losses | Percent Increase |
|---|---|---|
| 2017 | $136,939,624,000 | |
| 2018 | $148,768,919,000 | 7.85% increase |
| 2019 | $155,085,961,000 | 4.25% increase |
| 2020 | $172,088,377,000 | 10.96% increase |
| 2021 | $184,908,130,000 | 7.45% increase |
4. Commercial Auto Insurance is currently experiencing one of the greatest consecutive price increases month over month for premiums. In fact, it’s been increasing for the past 9 and a half years (38 annual quarters). In 2021 the price increase topped out at 8%. This is lower than the 8.1% average of price increases for all insurance policies in 2021.
5. In quarter 2 of 2022 the change in price of Commercial Insurance in the US increased by 10%. This marks 3 and a half consecutive years where the price of Commercial Insurance has increased.
6. The percentage of small businesses using Commercial General Liability insurance (CGL) dropped from 61% down to 54% between 2014 and 2018. The number of small businesses with Business Owner’s Policies (BOPs) also dropped from 52% to 45% over the same period. This likely due to the fact the price for BOP coverage and CGL plans have increased steadily over the past few years. This has lead to many small businesses to walk away from these options in favor of reducing their insurance spending. Unfortunately, this means more and more small businesses, and their customers, are left completely vulnerable to injury and property damage claims.
7. Of the various lines of commercial insurance policies, Workers Compensation is the second largest making up 6.2% of total net premiums written in 2021. This comes as no surprise since Workers Comp insurance has seen 8 consecutive years of underwriting profits.
8. 69% of small businesses in 2014 were covered by Workers’ Compensation insurance. Only four years later, in 2018 only 47% of small business owners held a Workers’ Comp policy. This drop in Workers Comp insurance seems to stem from a greater overall confidence in the Affordable Care Act. At it’s inception the Affordable Care act, many businesses were skeptical at it’s effectiveness and hesitated to rely too heavily on a new law. As the dust settled, we have begun to see more small businesses integrate standardized health insurance coverage into their business model, opting out of classical Workers Compensation policies.
9. The amount of Product Liability insurance premiums jumped up by 3.5% between 2020 and 2021 from $3.239 Billion to $3.353 Billion.
10. In 2014, 19% of small businesses purchased Business Interruption insurance and that amount grew all the way to 28% by 2018.
11. Not only has Business Interruption insurance been on the rise, so has Directors and Officers (D&O) insurance and Errors and Omissions (E&O) policies. D&O insurance increased by 13% in 2021, according to the CIAB. The only Commercial Insurance policy with a greater increase during that year was Umbrella insurance with a growth of 20%
12. Between 2020 and 2021, spending on Property and Casualty insurance increased from $652.8 Billion to $715.9 Billion. This is a growth of 8.44%. This is unprecedented especially when you consider that total property/casualty and life/annuity insurance premiums only increased from 51.1% in 2020 to 53.0% by 2021.
13. According to the Insurance Information Institute, the total number of insurance brokers and insurance sales agents will increase 9% by 2024. Based on the trends mentioned above, with more and more business owners wanting to protect their assets, it makes sense why the insurance industry as a whole is protected to see a lot of growth in the coming years.
20 Ways to Lower Your Business Insurance Costs
As you can see, there is a lot that can go wrong in business. Property damage, bodily injury, financial losses, and a whole list of other disastrous situations can completely derail a perfectly good business.
All it takes is one customer, client, or employee to experience some unfortunate turn of events and then they’ll be looking at your business to front the bill and recompense them for their losses or damages. Depending on the extent of the losses or damages, it can prevent your business’s growth or completely wreck your whole operation.
There is risk of incident any time a transaction is completed between your business and at least one other party. To put it another way, the more business you do, the more of a chance of a mishap.
Don’t worry.
None of this should discourage you from starting a business.
Regardless of your line of work, there are many things you can do to reduce and even completely eliminate potential risks. By getting business insurance, implementing preventative measures, and following safety guidelines, your business will be able to avoid total devastation and recover faster in the event something goes wrong.
It’s important to always consider the areas of your business you need to protect most. For instance, what processes does your business depend on and which carry more inherent risk.
With so many different types of commercial insurance available, you can get the right plan to protect your company’s assets from common risks your businesses may have a higher chance of encountering.
Insurance policies should always be combined with the preventive measures you take to further lower your risk of accidents or other events which may disrupt your business’s day-to-day operations.
Business insurance is not something to be taken lightly.
It can mean the difference between keeping your doors open or closing them for good.
It doesn’t matter how small or big your business is, you’ll always be better off having the right insurance and never using it than to be lacking coverage when you need it most.
Here are a few tips and tricks you can use today to lower your risk of ever having to deal with the most common insurance claims mentioned above:
Burglary and Theft
1. Install fencing around the building and parking areas to limit entry/exit to one or two gates.
2. Security camera systems and access keys using company ID cards.
3. Installing sufficient lighting both inside and surrounding the building.
4. Employee background checks
5. Practice operational security and use password access for company files whenever possible.
Reputational Harm
6. Do not criticize your competitors in front of customers or on social media. In fact, you really shouldn’t be criticizing them period.
7. Get permission before using other peoples’ photos, graphics, or other forms of information so as not to break Copyright and Trademark laws.
Water and Freezing Damage
8. It’s a good idea to not let your buildings’ internal temperature drop below a certain point, even if nobody will be in the building for an extended period of time.
9. Regularly clear snow and ice off roofs to avoid excess buildup. and subsequent collapses or cave-ins.
10. Always inform managers and other high-level employees where the building’s water shut-off valves are located.
Fire
11. Create, practice, and follow and emergency preparedness plan.
12. Make sure all emergency exits are clearly marked.
13. Employees should always know where the closet exit is and also where the next closet one is, just in case the first exit is blocked.
14. Follow your local and the national fire codes and regulations. Make sure to test your emergency equipment on a regular basis. This includes things like sprinkler systems, fire extinguishers, fire hoses, ladders, etc.
Wind and Hail Damage
15. Regularly trim trees on company property to avoid overgrowth.
16. Make it a routine to walk around the building and remove any debris which could cause damage or harm in the event of a serious storm or high winds.
17. If you store some equipment outside, make sure it is safely secured in place and won’t be carried away by strong winds.
Vehicle Accidents
18. Check employee driving records before giving them the keys to company vehicles and equipment. This also applies to letting them drive personal vehicles for business purposes.
19. Reckless driving or equipment operation by untrained personnel endangers your business, the driver, pedestrians, and anyone else in the vicinity.
20. Do not incentivize speedy deliveries. They don’t save as much time as you think they do.
8 Popular Frequently Asked Questions:
1. What is the Largest Insurance Company in the world?
Chubb Ltd. wrote $22,323,908,000 worth of commercial insurance premiums in 2021, making them the largest insurer in the US. Chubb Ltd. accounts for over 1/20th of the marketshare of insurers in America, 5.6%. They are followed by The Travelers Companies Inc., which issued $19,816,342,000 worth of commercial insurance policies, and Liberty Mutual with $19,473,757,000 worth of commercial insurance lines.
On a global scale, Berkshire Hathaway holds the top spot for the insurance company with the largest revenue. In 2021, Berkshire Hathaway brought in $276,094,000,000 from property and casualty insurance. The next two biggest insurers are both based in China and specialize in life and heath insurance. The second largest insurance company worldwide is Ping An Insurance with a revenue of $199,629,000,000 and China Life Insurance with a revenue of $157,095,000,000.
2. Do Corporations and LLCs need liability insurance?
The protection offered by Limited Liability Companies and Corporations only covers your personal assets. This includes things like personal accounts, investments, vehicles, and properties. This protection on it’s own does not meet the company insurance requirements set by state governments. As a matter of fact, personal liability protection usually doesn’t even protect your personal property and assets in cases of malpractice and negligence or where the Corporate Veil has been pierced. When it comes to Corporations and LLCs, the business is legally viewed as a separate entity from yourself and your personal assets. Unfortunately, the Shareholders and Members of Corporations and LLCs, respectively, can do things which can destroy this separation and void all the personal protection that comes with it. Lawyers and attorneys have been known to find unique loopholes and special circumstances where the corporate veil can be pierced even when company owners have seemingly followed the rules and regulations of LLCs and Corporations. All this is to say personal limited liability protection is not universal and there are many times when it simply doesn’t protect you or your company. Without the right insurance policy or bundle, you risk losing your business and your personal assets.
3. Does my business need insurance?
Without commercial insurance you are putting yourself and your business at risk. Accidents, emergencies, theft, and lawsuits can wreak havoc on your business’s finances. If your business is unable to pay out of its own accounts, you might end up having to pay out of your personal savings and investments.
Depending on the product or service your business provides, you might be required to have certain insurance policies where applicable. Let’s say you have employees, your state most likely requires you to have a Workers’ Compensation insurance policy. Some insurance is needed to receive licenses, certifications or permits for your business. Some real estate firms require their tenants to pick up special insurance. There are also international product and raw material suppliers require you to own insurance if you want to buy through them.
4. Is Workers’ Compensation insurance important for my business?
Simply put, if your company has employees on payroll you needs workers’ compensation insurance. In the event someone on your staff gets injured and the company doesn’t have workers comp they can easily sue the company to pay for their medical bills, rehabilitation, missed wages they would have received, and more. It’s important to speak with legal professionals and your state insurance commissioner because the laws, administrative bodies, and structure for making claims surrounding workers comp insurance vary by the state.
5. What if business insurance is too expensive?
40% of small businesses remain uninsured in order to save money. In reality, insurance can save you a lot more money in the long run than if you forego paying annual insurance premiums. Without insurance, all it takes is one bad accident or some natural disaster to strike and you could lose much more than your business, you could use your personal assets, investments, and savings.
If you are strapped for cash, one of the best options you have for insurance is getting a standard or customized insurance bundle. This is what is known as a Business Owner’s Policy or BOP. Combining insurance policies is more affordable than buying the necessary policies separately. There are additional measures you can take to further reduce the cost of insurance for your business. For instance, you can get cheaper premiums by setting up a higher deductible. Just be careful doing something like this because it can be a bit of a double-edged sword. You’ll have you the coverage you need but it also means you’ll pay more out-of-pocket should something bad happen.
6. How do I get the best insurance rates for my business?
It doesn’t matter what you sell, you should implement risk management as a regular practice in your business. Doing this gives you a good look at areas or events where your business is more likely to lose money. If the risk is significant enough you should heavily consider getting insurance coverage in that area. Risk management allows businesses, both large and small, to make sure they aren’t paying for pointless policies while at the same time being covered in the areas you need it most.
There are four simple steps to properly evaluate and manage your company’s risk:
1. Identify where potential losses may occur. This incudes cases of theft, employee and customer injuries, fraud, natural disasters, etc.
2. Calculate the financial risk of each event should it occur. How often would something like this happen? How much could this potentially cost your business.
3. Brainstorm ways to prevent these events from happening. What practices can you put in place to reduce these risks or even eliminate them completely? How much of the potential cost of such events would be covered by the relevant insurance policies?
4. Based on what you came up with for the previous steps you should now have enough information to start deciding which types of insurance are right for your company.
The price you pay for coverage is usually based on your claim history. To keep your rates low, you can pay out-of-pocket for inexpensive and infrequent losses and make less unnecessary insurance claims. The more claims your business makes, the more you pay for insurance.
Another way to reduce your insurance costs is to look at different insurance providers and the different packages and rates they offer. It is not uncommon to for businesses to change providers every once in a while. If you find a better deal which fits for your situation don’t be afraid to take it. One great method to find the best insurance policy for your needs and budget is to compare bids from multiple insurance companies.
7. What deductibles do I need?
When it comes to business insurance policies the minimum deductible is $250 per incident. The higher the deductible, the lower the cost of your insurance premiums. It’s important to think about what your business does, where it’s located, and the chances of a mishap taking place. Although it depends a lot on your insurance provider, most don’t offer deductible for liability insurance like they do for property insurance.
8. When should I change my insurance policies?
Operating a business is dynamic in nature so we highly encourage you to reassess your business’s current insurance and your risk at least once a year. It is preferable to do this biannually or even quarterly. You should also make it a point to reassess your company’s insurance needs after significant changes take place.
Regularly reviewing your policies is important for keeping your insurance in check. It’s the only way you’ll know if you are underinsured for your current state of affairs or if you can reduce your coverage in certain areas so you aren’t paying for unnecessary insurance claims.
Don’t Be Like The Other Companies.
Unless the industry or state you work in makes commercial insurance mandatory, most business owners will put off buying insurance for their company, sometimes until its too late.
Make sure you get insurance… BEFORE you need it.
A proper business provides not only to the customers in the marketplace but also to the community. If a business fails, the consequences may be greater than you can imagine.
Don’t just think about the financial aspect but you should also take into consideration the emotional, mental, and psychological toll it can take on your family, community, and other businesses which may rely on your goods and services. Not all insurance is equal and the same goes for insurers. Some insurance providers cater specifically to the needs of small business and can meet your needs and your budget, while other providers have larger and more expensive policies designed to handle the needs of large scale businesses.
The best thing you can do right now is brainstorm where your business faces the highest risk.
The money you spend on insurance premiums may seem like an unnecessary expense when it’s not actively doing anything for your business and it seems like it’s just a dormant money pit.
However, if a situation arises when you need the insurance coverage, you’ll be glad you made the right decision to protect your assets.
DISCLAIMER:
Speak with your insurance provider and take a look at what options are available. Every business is different. Take the time to speak with insurance professionals to come up with the best coverage and deductibles to meet your specific needs.
“Business Initiative” is for general educational purposes only. “Business Initiative” does not offer any legal or financial advice. Anyone considering starting a business or purchasing insurance should speak with a lawyer, business professional, financial advisor, and tax expert before making binding decisions regarding starting, operating, and growing your business. Use external resources independently of “Business Initiative.” It is the responsibility of every reader to seek legal and financial advice from legal and financial professionals.