What Is Commercial Insurance? (Pricing, Examples, Types & More)

Commercial insurance, also commonly referred to as business insurance, provides coverage for the owners and employees of a small business or corporation, as well as for the business itself. For example, commercial insurance could protect businesses from litigation, property damage, customer or employee injuries, or cyber-attacks.

As every business is different and has its own needs, there are thus multiple types of commercial insurance policies on the market. However, in general, commercial insurance helps ensure that businesses are safe from certain threats, including financial threats and other concerns that threaten the reputation of a business.

Something that differentiates commercial insurance from personal insurance is that commercial insurance often covers multiple people or stakeholders. In addition, commercial insurance tends to offer far more coverage because of the number of stakeholders that can be covered under a singular policy.

How much does commercial insurance cost?

As mentioned earlier, commercial insurance policies can be tailored to the specific circumstances and needs of a business, depending on the industry they’re in, their daily activities, and other factors. As a result, it’s nearly impossible to pinpoint how much a commercial insurance policy costs, but some external factors that impact the cost may include:

The type of company
The number of people the company employs
The geographic region of the company
How many years the company has been in operation
The number of risks the company is exposed to

While this is not an exhaustive list, it can provide some insight into the factors that impact the cost of commercial insurance. And while commercial insurance is unlikely to cover every potential liability against a business, it can help shoulder the financial costs of certain risks.

Types of commercial insurance

While there are a number of different types of commercial insurance, some of the most common ones include:

Commercial auto insurance

While not every business will require commercial auto insurance, this type of policy is especially useful if the company relies on vehicles or other automobiles for business activities. Similarly, equipment breakdown insurance is useful if the business frequently uses any type of hazardous tool.

Workers compensation insurance

This type of insurance is often required by law for businesses to have, particularly those in industries such as manufacturing, construction, or engineering. Generally, workers compensation insurance protects the business in the case of a lawsuit brought about by a work-related accident or injury. This type of policy also usually covers the medical costs of an employee who is injured while at work.

Cyber liability insurance

As the internet becomes more and more crucial for businesses, cyber liability insurance is growing in popularity. This type of insurance protects businesses in the case of a data breach or if a business faces cyber security threats. This is especially important because many businesses collect the personal information of thousands if not millions of people through servers, so being hacked can have significant financial repercussions.

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Business owner’s policy insurance

This type of commercial insurance provides employers and businesses with several basic policies in a bundle, such as general liability and property insurance. This can be a less costly version of picking out individual commercial insurance policies, especially if your business doesn’t require more niche coverage.

Business interruption insurance

A useful type of commercial insurance for many types of businesses, business interruption insurance covers any financial losses your company may face in the event that some sort of accident or unexpected event halts the operation of your business.

General liability insurance

This type of commercial insurance helps protect your business against any litigation in the case of an injury or property damage affecting a client or anybody else who is not employed by your business.

Errors and omissions insurance

Commonly referred to as E&O or professional liability insurance, errors and omissions insurance comes into effect if a client sues your business over things such as an error, a missed deadline, or another mistake made on behalf of your company.

How does commercial insurance work?

It can be helpful to go over a hypothetical scenario of how a business might exercise its commercial insurance policy to cover a workplace-related incident.

For example, a business in the technology sector might be the victim of a break-in that saw several expensive computers stolen. In this case, the business would file a claim with their commercial insurance provider. Then, the insurance company would investigate the validity of the claim, calculate the amount of damage and losses that were accrued during the break-in, and then cover the amount the laptops were worth and any other damage that occurred to the building as a result of the break-in.

While this hypothetical property theft claim is fairly straightforward, other types of commercial insurance claims, such as a liability claim, are usually more complicated. For instance, if somebody filed a lawsuit against your business and was looking to seek financial compensation, your commercial insurance would likely cover the cost of your attorney’s fees and other costs associated with court. The insurance may even partially cover the settlement amount or the amount determined by the judge.

Details of a commercial insurance policy

Similar to other insurance policies, there are some key aspects of commercial insurance to keep in mind before purchasing a policy. The table below outlines these key aspects.

Premium	This is the amount that you pay for a commercial insurance policy, and usually involves monthly, quarterly, or annual payments.
Deductible	This is the amount of an insurance claim you must pay before your insurance provider covers the rest of the claim. For example, if you have a $5000 deductible and your lawyers’ fees cost $20,000, then your insurance would pay $15,000.
Policy limits	This is the total amount of coverage that you have, or in other words, the maximum amount of money your insurance provider will cover per claim, or per the life of the policy. (Many businesses have commercial policy limits of around $1 million)
Coverages and exclusions	This outlines what kinds of claims your insurance provider will or will not cover. For example, a common exclusion is that your insurance provider won’t cover the costs associated with the business intentionally harming another person.

Things to keep in mind before purchasing a commercial insurance policy

There are many commercial insurance companies out there, so it’s best to talk to an insurance broker who can compare the types and costs of different policies with you, or you can do some online research yourself since many insurance companies now list their policies online.

However, to figure out which type of commercial insurance is right for your business, here are some key considerations to keep in mind:

Whether your business deals with members of the public
Whether your business has a physical premise
If you rely on an automobile or other type of vehicle to conduct your business activities
If your business uses work tools or other equipment
Whether your business produces a product or service

Asking yourself these questions can help make sure that your commercial insurance policy is tailored to your specific business needs. This is to ensure that you aren’t underinsured or end up paying for additional coverage that you don’t actually need to run your business.