What is commercial insurance?

We explain what is commercial insurance and why it matters for your small business. Learn more with our commercial insurance guide.

commercial insurance policy being reviewed

If you run a small business, you’ve got a million things on your plate that you need to worry about—getting sued shouldn’t be one of them. Even if you run a low-risk operation, all it takes is one liability suit to tip your cash cow.

Question is: how do you shield your company from risk?

The most important step any small business owner can take to mitigate risk begins with selecting the right commercial insurance policy. Since no two companies are alike, there are a variety of different commercial insurance plans and coverage options you can choose between.

Because there are so many variations to a commercial insurance plan, we’ll cover the must-haves for any small business.

What is commercial insurance?

A commercial policy is often referred to as business insurance. At its essence, a commercial insurance policy is meant to help a business mitigate the various risks that might impact its financial future. That said, it has some key differences from personal insurance:

  • It typically covers multiple employees, rather than just the policyholder; it considers the actions of anyone acting on behalf of ‘the business.’
  • It generally has much higher coverage limits because property, equipment, and assets are all at stake.
  • There is more flexibility, seeing as plans are tailored to a business’ specific needs, risks, and industry.

That said, there are several types of business insurance worth looking into and including. Depending on your state, some will be legally required, while others are just highly recommended.

General liability insurance

No matter the size of your business, no matter the industry, you’re going to need a general liability insurance policy. This protects you from the various liabilities that arise from running a business and interacting with clients and the public at large—people not acting on behalf of your business, referred to as ‘third parties.’ It acts as a buffer from liability claims made by third parties and can help pay for your costs, damages, and legal fees in three key cases:

  • Medical Expenses
  • Bodily Injury
  • Property Damage

So, if a customer gets hurt on equipment that’s been left out, or a passerby slips on your unshoveled sidewalk, or an employee accidentally damages a client’s property, your general liability policy could kick in and help pay, so you don’t have to go at this alone.

Professional liability insurance

Professional liability insurance was created to protect professionals and experts from being sued for negligence in regard to the professional services they provide. Also known as errors and omissions (E&O), this allows them to be confident, give advice, and do their job without fear of client retribution, should their suggestions not pan out and their clients suffer financial loss as a result.

Some examples of professions that need E&O included in their commercial insurance policy include:

  • Consultants
  • Photographers
  • Accountants
  • Engineers

Typically, a commercial liability policy would cover two main costs:

  • The various fees of enlisting and then maintaining a legal defense team
  • Damages or settlement payments arising from negligence claims, regardless of your fault in the matter

Workers' compensation

Workers’ comp is one of the few types of insurance that is legally required in almost every state. Each state differs in how many employees—whether part-time or full-time—must work for the company for the policy to be mandated, but generally speaking, it’s required if you have three or more employees.

But what does it cover?

It’s a type of accident insurance that protects employees from illness or bodily injury that occurs at work or on the job. By having it, employers prevent employees from suing the business for negligence. In addition, it covers the various costs related to an accident such as:

  • Medical expenses
  • Treatment/surgeries
  • Wage-loss compensation
  • Rehabilitation
  • Permanent disability
  • Provides benefits to dependents in the case of a job-related death

On top of that, a workers’ compensation policy would help cover the legal defense fees should the matter require arbitration in the courts.

Commercial auto insurance policy

If your business has a vehicle that is registered to it and/or purchased by the company, every state requires that you purchase a commercial auto insurance policy, especially if you use the vehicle to commute to work, transport clients, employees, or equipment.

Such a policy shields your business, whether you or an employee is driving the vehicle. Should an accident occur, the commercial auto insurance would cover your legal fees as well as any damages to the third party, including:

  • Bodily Injury
  • Medical Bills
  • Property Damage
  • Vehicle Theft or Damages

Although the rates vary, almost every state has policy limit coverage requirements that look like:

  • $30,000 for damage to property of others per accident
  • $30,000 bodily injury liability per person
  • $60,000 bodily injury liability per accident

As a final note, it’s essential that if either you or your employees use your vehicle for work purposes, your personal auto policy likely excludes coverage in the case of the vehicle being used commercially. So, if you want to use your car for the day-to-day tasks of the job, you’ll need to buy a hired and non-owned auto insurance policy for collision coverage.

Cyber liability insurance

In the digital age, cyber-attacks have taken over as the number one crime in the country. It’s not just big businesses being hacked. If a cybercriminal intrudes upon your business, they could cause chaos resulting in data breach, cessation of business operations, loss of trust by clients, and a host of other damages.

A cyber liability insurance policy protects you from the likely event of cybercrime and would help cover a variety of damages, including:

  • Settlements
  • Damages
  • Legal fees
  • Ransom payments
  • Notifying impacted customers and then restoring their data
  • Data recovery
  • Repairing or replacing faulty computer systems
  • Enlisting a PR team
  • Lost revenue caused by interruption to the business

Protect yourself with Thimble

Are you in the market for general liability and professional liability insurance?

As luck would have it, Thimble’s Small Business Insurance is changing the way businesses get coverage. Our affordable plans are on-demand, meaning you can purchase a plan for when you need it and save when you don’t.

Thimble: dynamic liability insurance with coverage limits of $1 million or $2 million by the hour, day, or month. The quote is free, adding Additional Insureds is free, unlimited Certificates of Insurance are free, and cancelling is free. Why? Because we believe in making insurance make sense. With Thimble, getting protected has never been easier.

Our editorial content is intended for informational purposes only and is not written by a licensed insurance agent. Terms and conditions for rate and coverage may vary by class of business and state.

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