Starting a business is risky. You face competitors, changing markets, and long hours. But one risk you shouldn't face alone is the risk of a lawsuit or disaster wiping out everything you've built.
Commercial insurance is the shield that protects your business assets, your employees, and your reputation. Whether you are a solo consultant, a contractor, or a retail store owner, this guide covers the essentials.
Part 1: The Core Policies
1. General Liability (GL)
This is the foundation. It covers "slip, trip, and fall" accidents and third-party property damage.
- Scenario: A customer trips on a loose rug in your store and breaks their arm. GL pays their medical bills.
- Scenario: You are painting a client's house and spill paint on their expensive carpet. GL pays to replace the carpet.
2. Commercial Property
This covers your physical assets: your building (if you own it), your inventory, equipment, and furniture.
- Crucial: It covers theft, fire, and storm damage. Even if you rent your office, you need this to cover your computers and stock.
3. Business Owner's Policy (BOP)
The Golden Ticket. A BOP bundles General Liability and Commercial Property into one package.
- Pros: Usually 10-20% cheaper than buying separate policies.
- Bonus: Often includes "Business Interruption Insurance," which replaces lost income if a fire forces you to close temporarily.
Part 2: Specialized Coverages
4. Workers' Compensation
Mandatory in almost every state as soon as you hire your first employee.
- Covers: Medical bills and lost wages for employees injured on the job.
- Protects You: In exchange for these benefits, employees generally cannot sue you for workplace injuries.
5. Professional Liability (E&O)
Essential for service providers (consultants, accountants, real estate agents).
- Covers: Claims of negligence, mistakes, or failure to deliver services.
- Scenario: A web developer launches a site late, causing the client to miss Black Friday sales. The client sues for lost revenue. GL won't cover this, but E&O will.
6. Cyber Liability
Critical for any business that stores customer data or takes credit cards.
- Covers: Costs associated with a data breach (notifying customers, credit monitoring) and ransomware attacks.
7. Commercial Auto
Personal auto policies usually exclude business use. If you or your employees drive personal cars for work deliveries or client visits, you need a commercial auto policy or "Hired and Non-Owned" auto coverage.
Part 3: How to Buy Smart
- Classify Correctly: Insurance rates are based on class codes. A "Clerical" employee is cheap to insure; a "Roofer" is expensive. Ensure your employees are classified accurately to avoid overpaying.
- Review Contracts: Many client contracts require specific insurance limits (e.g., "$1 Million per occurrence"). Check your contracts before you buy.
- Audit Annually: Workers' Comp premiums are estimated at the start of the year based on projected payroll. At the end of the year, the insurer audits you. If you hired more people, you owe more. Keep clean payroll records to make the audit painless.
Business Insurance Checklist
- Sole Proprietor? Consider a GL policy to protect personal assets.
- Hiring? Set up Workers' Comp immediately to avoid state fines.
- Renting Office? Landlords usually require a Certificate of Insurance (COI) proving GL coverage.
- Digital Data? Add a Cyber Liability rider.
- Consultant? Don't skip Professional Liability.
Build your business on a solid foundation. Get a commercial insurance quote today.