The Strange Beast of Commercial Insurance
Commercial insurance or business insurance is an entirely different animal compared to personal insurance.
Most people are at least basically familiar with personal insurance because it’s something each of us deals with a couple times a year.
But if you’re about to dive into deep waters of opening your own business, even a part-time business, trying to find the right commercial insurance can quickly become an overwhelming task.
As much as I’d like to give everyone a complete plan to make sure they are thoroughly covered, I really can’t without talking with you and learning the nuances of your business.
Commercial insurance is a very specialized type of coverage depending on what type of business you own. A restaurant business needs different coverage options than photography business, just as a carpentry business needs different coverage options than a graphic design business.
But there are some basics we can discuss to help get you headed in the right direction.
General Liability for Business
The first area you need to consider when looking at commercial insurance is general liability.
General liability, or GL, is the part of your insurance that covers you regarding damages you or an employee might cause during the course of conducting business.
It protects you from liability claims for bodily injury; property damage arising out of premises, operations, products, and completed operations; as well as advertising and personal injury liability.
Did you accidentally drop a camera on someone’s foot during a photo shoot? The injury should be covered under your general liability.
Did you cater a big wedding and four bridesmaids came down with food poisoning? That’s usually covered under your general liability.
Did someone hire you to redo their cabinets, and you accidentally spilled stain on their brand new hardwood floors? That’s likely covered under your general liability.
Did you accidentally slander the other graphic design business you’re competing against in a newspaper add? That, too, is usually covered under your general liability section.
Notice how I was slightly non-committal about the coverage saying things like, “should be,” “probably,” and “usually”?
That’s because each general liability section will contain exclusions—essentially what’s excluded from coverage.
Some of those exclusions are general and apply to all types of businesses.
However, there are also exclusions based on what type of business you’re in.
It is important you take time to read the exclusions so you know what is omitted from coverage.
What Coverage Amount?
Coverage for general liability usually starts at $500,000 (but it can be lower) and moves up into the multiple millions from there.
You also have the choice to set the “per occurrence” limits and “aggregate” limits at same or different amounts.
Your “per occurrence,” or “per claim,” limit refers to the total amount the insurance company will pay per incident during the policy term.
Your “aggregate” limit is the total amount the insurance company will pay for multiple claims over the course of a one-policy term, which is typically one year.
So if you carry $500,000 per occurrence and $500,000 aggregate and you have a $500,000 personal injury claim that’s paid out for slander in the first three months of your policy term, you are essentially without liability coverage for the rest of the year.
I use this example for a reason: new business owners typically are looking for the very cheapest insurance they can get. And let me say, “I understand; I’ve been there before, too.”
I know how tight money can be in the beginning. But general liability is definitely not a section you want to skimp on. Paying an extra $200 a year (that’s $16.67/mo.) for more liability coverage isn’t going to be a line item that sends you into Chapter 11.
But if you don’t carry enough liability coverage and you’re sued, that’s something that can bankrupt your company.
Plus on a large number of our quotes, the difference in carrying $500,000 to $1,000,000 in GL is a lot less than $200.
I’ve even seen it where $500,000 and $1,000,000 are the exact same price! Why would you not want to get twice the coverage for just a few dollars more?
My suggestion is to at least start with a $1 million per occurrence, $1 million aggregate or a $1 million per, $2 million aggregate.
Get a quote for both and then talk through what type of risks are out there for your business.
