Our clients frequently ask us the question “what is business insurance?” . The answer is a little more complicated than it seems. As a business owner, you work hard to ensure the success of your business. Accidents happen. It is important to protect your livelihood by properly covering your business in the event of such an accident. Different business operations require different coverages. As a general example, common sense would dictate that a restaurant owner requires different coverage than a general contractor would. You can see how it would be difficult to provide a general answer to the question as each business is unique. But for the purpose of this post, we will elaborate on the most common forms of business insurance. Beginning with Commercial Property. With this, we aim to answer some general questions you may have about business insurance and clear up a few misunderstandings along the way.
Commercial property insurance is important to most business owners. It covers physical loss or damage to the building, contents, stock, and/or equipment. Most business owners carry inventory or use equipment, some own the building they operate in. This coverage is essential in protecting these things and that is why this coverage is one of the most common forms of business insurance. It is possible to also include business interruption insurance which covers income and expenses from insured perils while your business is recovering from a loss.
Commercial General Liability (CGL)
Commercial general liability insurance is another common form of business insurance. All businesses take on risk as they operate. As your business performs day to day operations, your business can be vulnerable to lawsuits. For example, simply operating a retail store can result in a customer slipping and falling while on your business’ premises. This can lead to large lawsuits against your business. Commercial general liability coverage protects your business from such lawsuits from third parties. The following are coverages provided under the CGL form:
A. Bodily Injury and Property Damage (BI & PD)
This coverage protects your business from lawsuits arising from physical damage to a third party or their property. This coverage will also pay for legal fees in defending your business and/or compensatory damages.
B. Personal Injury and/or Advertising Injury Liability
Often confused with bodily injury, personal injury has nothing to do with physical damage. This coverage protects your business from lawsuits as a result of damage to a third party’s character or reputation. It can be combined with advertising injury which covers the same but as a result of your business’ advertising of goods or services as well. This coverage is necessary for businesses such as retail stores. For example, a customer is thought to have been stealing and is caught by an employee of your store, they are then forced to remain in the store until the police arrive. They may sue you for damage to their character due to false imprisonment and slander. In this case your CGL would pay for the legal fees and damages in the resulting lawsuit.
C. Medical Payments
This part of a CGL package covers a third party’s minor medical expenses due to accidents that happen on your business’ premises or as a result of your business’ operations even though you may not be held legally liable.
D. Products and Completed Operations
Products and Completed Operations coverage protects your business from lawsuits arising from damages as a result of products you sell or services you complete. For example, a manufacturer would require this coverage to protect themselves from lawsuits that can arise from a product they manufacture causing some form of damage to a third party. Again this coverage would pay for the legal fees and damages in the event that you are sued.
E. Tenants’ Legal Liability
Tenants’ legal liability covers damages to the building or unit if your business is held legally liable and you are not the owner. It does not include the contents inside such as stock or equipment. Only the damage to the rented premises.
We hope this clears up a lot of the questions you may have on business insurance and the types of coverages offered. Your business may require specialty coverage and this brief summary may not be comprehensive enough for your complete understanding. Should you have any other questions or want more details contact one of our qualified insurance professionals to answer any further questions you may have.