Small Business

What Is a Commercial Insurance Plan and How to Choose One for Your Small Business?

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By Next Insurance Staff
Jun 24, 2020 min read

One of the great things about being a small business owner is the level of freedom and control you have over your career. Being your own boss definitely has its perks! To quote Spider-Man’s uncle, though, with great power comes great responsibility. Owning a business means taking responsibility when things don’t go quite as anticipated. No one is perfect, and no matter how well you plan, there might be bumps in the road that can put your business at risk.

While you can’t eliminate the risks, you can prevent those incidents from harming your business by getting a good commercial insurance plan.

What Is a Commercial Insurance Plan?

You’ve probably heard of insurance in the context of things like auto insurance, house insurance, or life insurance. Those are individual insurance plans. When you own a business, however, it’s a good idea–and sometimes legally required–to have commercial insurance.

Commercial insurance is a type of insurance that is specifically designed for the needs of your business. So if, for example, you have individual auto insurance, that will help if something happens to your personal vehicle. But the kind of coverage it provides has limitations. It might only cover a limited number of drivers or a certain geographic area. It also might have a ceiling for the costs of repair or replacement that isn’t quite enough to cover the costs of repairing a commercial vehicle, such as a truck or van, which is often more expensive than a personal vehicle.

In other words, your needs as a small business owner are different from your needs as an individual. Small business insurance plans, such as commercial auto insurance, are tailored specifically to suit your business needs.

What Might an Insurance Plan Include?

Insurance companies normally offer a few different types of insurance plans. The type of plan that’s right for your business depends on what you do, where you do it, what equipment you have and a variety of other factors.

General Liability Insurance

General liability insurance is the most basic level of insurance that covers you in cases where there’s an accident and your business might be blamed for it. It generally covers three kinds of damage: bodily injury, personal injury and property damage. If you run a day care, for example, and one of your kids takes a tumble and needs medical attention, that’s a case of bodily injury. If you’re a hair stylist and a celebrity you worked with sues you claiming that the hairstyle you gave him damaged his reputation, that’s a case of personal injury. If you’re a piano tuner and you spill coffee over the keys of a client’s expensive Steinway, that’s a case of property damage. General liability might be able to help cover whatever costs are involved in cases like these, including compensation for the person who claims damage. This ensures that you’ll be able to continue growing your business.

Note that general liability insurance only applies in cases where the damage was to a third party–meaning, not to you, your business itself or one of your employees. There are other types of insurance that can help in those situations.

Professional Liability Insurance

Professional liability insurance is also known as errors & omissions insurance or malpractice insurance. Sometimes the difference between professional liability and general liability can be hard to pinpoint, but in general, while general liability can cover you when there’s an accident, professional liability coverage helps in cases where you make a professional mistake. So in our day care example above, the fall was the result of an accident. But if, say, you are a fitness instructor and you told your client to do something that caused her to fall and hurt herself, that might fall under the category of a professional error.

Commercial Auto Insurance

If you use a vehicle for your business–a truck for transporting equipment, for example–commercial auto insurance is a must. As explained above, personal vehicle insurance isn’t right for a vehicle used commercially. Commercial auto insurance might have higher ceilings and cover different types of risks, and–if necessary–might also cover multiple drivers and/or a larger geographic area.

Worker’s Compensation Insurance

If you are an employer, the law requires you to have this type of insurance to protect your employees. It helps cover the costs of damage that might happen on the job: for example, if you’re a contractor and one of your workers drops a hammer on his toe while working on a project. Another example might be if you’re a caterer with multiple employees and one of your workers gets attacked by the family dog of a client. Worker’s comp can help cover their medical fees.

Property Insurance

If you run your business out of a designated property, or if you own expensive or otherwise hard-to-replace equipment that you use for your business, you need that property in good shape to keep your business running. That’s why it’s a good idea to have property insurance, which can compensate you if your property is damaged somehow.

Product Liability Insurance

If your company sells a certain product and someone files a claim that that product caused them damage, product liability insurance can help compensate them for the damage and/or cover your legal fees.

Business Interruption Insurance

One of the big responsibilities of owning a small business is that if you’re not able to run your business for a while, you won’t have an income. If you get sick, or if your property gets damaged, or there’s some other reason you need to take a break, business interruption insurance can help compensate you for whatever losses you might incur from the time your business is out of commission.

How to Choose the Right Commercial Insurance Plan for Your Business

The best small business insurance plans are the ones that take account of your business as a whole and offer you exactly the types of coverage that you might need.

Some things to take into consideration when choosing an insurance plan for your business:

  • Are there types of business insurance plans that are legally required for someone in your profession in the state where you live and work?
  • How are other professionals in your field generally insured?
  • Do you use or need a vehicle, such as a truck or a van, to run your business?
  • Do you have employees?
  • Is your business based on a certain premises? Do you own that premises? Will your business be damaged if something happens to that building?
  • Do you need specialized equipment for your business that might be hard or expensive to replace if it’s damaged?
  • Does your business sell products?
  • How much damage would it cause you financially if you were forced to stop running your business for a while due to health or other issues?

The answers to these questions can help you determine what kind of insurance is right for you. To learn more about small business insurance and how Next Insurance might be a good choice for your business, check out our Business Insurance page.

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By Next Insurance Staff
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