The Complete Guide to Buying Commercial Insurance: Everything to Know

The Complete Guide to Buying Commercial Insurance: Everything to Know

Finding the right insurance policy for your company requires knowing your options. This guide explains everything to know about buying commercial insurance.

Buying commercial insurance is one of the many big decisions you have to make for your business. In addition to seeking out commercial space or hiring the right talent, you also want to ensure you have adequate coverage to protect your business from lawsuits or claims.

You also want to ensure that your employees can rest assured that you will take care of them if they accidentally get hurt on the job.

So what is commercial insurance, why is it important, and how much can you save on your business policy? Continue reading below to find out all you need to know about buying commercial insurance and who you can reach out to for further guidance. 

Understand Your Business Risk Potential

While searching for different options for insurance, you must keep your business risk in mind. Some businesses carry more risk than others, and those that are riskier typically pay higher insurance rates. For example, an office-based business that takes phone calls is less riskier than a construction company. 

Most insurers have pre-determined levels of risks that they are willing to take on, depending on your industry. If you are seen as too risky, they most likely will turn you away or charge you a higher premium than average. 

Know the Different Types of Business Insurance

The insurance you need depends heavily on your specialty and business assets. The most common insurance policies purchased for a business are general liability insurance and BOP policies. 

General Liability Insurance

General liability insurance covers your business from third-party claims. For example, if someone slips and falls on your property, you can use your general liability insurance policy to pay for your patron’s medical bills.

It also protects you in the event that someone claims copyright infringement. Just like your auto insurance liability coverage, general liability insurance protects you for damages caused to others, not damages caused to your business. 

Commercial Property Insurance

Contrary to general liability insurance, commercial property insurance protects your business from any damages done to your business. For example, if someone breaks into your business, steals your computers, and causes damages to the premises, you can use your insurance policy to take care of those damages

Business Owner’s Policy

When buying commercial insurance, you may come across something called a business owner’s policy. A business owner’s policy, also known as a BOP, combines commercial property insurance and general liability. When you combine the two, your insurer typically provides you with an additional discount. 

Commercial Auto Insurance

If you use fleet vehicles for your business or you have a car you use primarily for business, you need commercial auto insurance. Most personal auto insurance policies don’t cover any damages caused to your vehicle or another vehicle if you use the car for business.

Commercial auto insurance policies operate similarly to regular auto insurance; the main difference is that you use one vehicle for personal use, whereas the other is mainly used for business. If you or your drivers get into an accident, your commercial auto insurance policy will cover damages caused to your vehicle and any applicable injuries. 

Workers’ Compensation Insurance

Workers’ compensation, also known as workers’ comp, is a coverage that pays for any work-related injuries. If your employee gets hurt while on the job, workers’ comp will pay for their medical expenses and any lost wages. Workers’ compensation is not required in all states, but it is best to have it to protect you and your business from any lawsuits. 

Professional Liability Insurance

Professional liability insurance is relatively popular amongst businesses that provide some form of service. For example, if you own a construction business or an interior design business, there is a chance you could cause a mistake. Professional liability insurance protects you from lawsuits that come about from your negligence, oversights, or errors. 

Cyber Liability Insurance

In today’s day and age, we are constantly on our devices and mainly conduct our businesses online. Several cyber criminals hack into business accounts to steal your information to sell.

In the event someone leaks data or holds your information for ransom, you will want to be sure you have protection to deal with that. Cyber liability insurance can help you with that, and they also cover any costs associated with the data breach. This includes any costs associated with lawsuits presented to you by your clients. 

Hired and Non-owned Auto Insurance

Hired and non-owned auto insurance, also known as HNOA, can help pay for accidents involved in any leased, rented, or borrowed vehicles. For example, if you have to rent a car for business use and get into an accident, you can use this coverage to pay for any damages.

In general, this is secondary coverage. This means that if the vehicle borrowed has auto insurance, that will kick in first before your HOA policy. 

Consider What Your Business Needs Legally

Buying commercial insurance is not only a good investment for your business, but it also may be a necessity. Depending on your industry, the type of clients you work with, and where you conduct business, you may be required to carry specific insurance coverages. 

For example, suppose you need to rent out commercial space to run your business. In that case, property management may require you to purchase a general liability policy to pay for any potential property or bodily injury claims.

Another requirement may be workers’ comp. As mentioned earlier, depending on the state you conduct business in, you may or may not need to have this coverage over your business. 

Prioritize Coverage over Cost

As a business owner, you already have several different costs you have to keep under control. This also includes the cost of your insurance premiums. Choosing a cheaper policy when comparing insurance costs may be tempting, but that may not be a wise decision. 

Cheaper commercial insurance providers only provide you with limited coverage, which may or may not help you when making a claim. There are some excellent insurers who can provide you with a reasonably priced insurance policy. When looking for the right insurer, make sure you take a look at their online reviews to see what other clients did or did not like about using them. 

Understand What May Affect Your Insurance Rates

Beyond the risk of your industry, you have to understand other factors that affect the cost of your insurance premiums. 

Other factors that affect your insurance rates:

  • Claims history
  • Years of experience
  • Size of your company
  • Business assets

While most of those things may be out of your control, there are some steps you can take to keep your premiums low. For example, you can make sure ensure your coverage doesn’t lapse. If you have a break in coverage, you will face higher premiums. 

Another way to keep premiums low is to create a safe working environment. Implement safety measures and give your employees the proper protection they need to do their job safely. When you have the right measures in place, you lower workers’ compensation claims.

Review Your Policy Deductibles and Coverage Limits

When shopping around for the right commercial insurance policy, there are a few things about your policy you should be aware of. For example, most people overlook the coverage limits and deductibles. The insurance policy’s deductible is what you have to pay out of pocket when you file a claim. 

Deductibles also directly affect how much you pay for your premiums. This is because you take on more risk when you have a higher deductible. For example, let’s say you have a $2,000 deductible.

This means that you have to pay the first $2,000 before your policy kicks in. You are taking on more risk than you would if you had a $500 deductible. When buying commercial insurance, be sure to pick a deductible that works best for your budget. 

Review Exclusions

Before you make your initial payment, take a good look at your policy, especially the exclusions. Reading the exclusions helps you understand the insurance terms and conditions, and you won’t have any surprises if you ever need to file a claim.

The main exclusions you will find on a commercial business policy are:

  • Prior acts
  • Known issues
  • Contractual guarantees
  • Fraud

There are some other things your policy won’t pay for that may fall under a different coverage. For example, if your employee gets hurt while on the job, your general liability policy won’t pay for that. Instead, you will have to file a claim under workers’ comp to pay for their medical expenses and lost wages. 

How to Find the Right Commercial Insurance Provider

Once you understand what type of coverages you need for your business, you will need to find a reputable insurer. As mentioned earlier, one great way to weed out the competition is to check out their reviews.

Reading online reviews helps you gauge how other clients liked working with a specific insurer and what challenges they faced. The best commercial insurance provider has prompt claim resolution, excellent communication, and high customer satisfaction ratings. 

Review Their Range of Benefits

When you find a few different companies to compare, take a look at their options for insurance. When looking at their product offerings, you want to see a mix of protections that include property insurance, general liability, business interruption coverage, and auto insurance. The goal is to have the option to cover all aspects of your business. 

Experience with Clients Similar to You

It is important to note that no two insurers are the same. It would be best if you looked for insurance companies that work with people in your same industry.

Why? Because insurers that work with clients like you have all the available products, you need to protect your business best. Commercial insurance companies who understand your industry can also recommend products you may not have thought about. 

Check Their Financial Strength

Unfortunately, not many people check a company’s financial strength before partnering with them. Most assume that all insurance companies have the bandwidth to handle paying out claims, but some of them do not.

To check the financial strength of a potential insurer, you can go through a rating firm such as A.M. Best. They advise that businesses with an A- rating or higher have the ability to meet their obligations. Companies with a B+ rating or higher have a “good” indicator for being able to meet their obligations.

If you come across companies with lesser ratings, you may want to continue looking elsewhere. Anything less than a B+ is considered riskier. Those types of companies also tend to have more complaints and issues with paying out their claims. 

Ask about Discounts

As mentioned earlier in the article, you could receive a discount on your insurance premiums if you purchase a BOP. Most companies provide you discounts if you buy more than one line of insurance. Be sure to ask your insurer about any potential discounts they can offer you. 

Get Help Buying Commercial Insurance

Buying commercial insurance coverage doesn’t have to be difficult, but for some, it can be, especially if you aren’t sure what to look for. Going with your first option may work for some things, but not when it comes to choosing the right commercial insurance for your business.

If you are ready to find out how much you can save on your commercial business policy, contact us for a free, no-obligation quote. Our team is prepared to help you determine what coverages work best for your industry. 

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