| NYC Business Group
What’s Commercial Insurance and How Does it Work?
After successfully opening a business, the need to protect it becomes imminent. No one wants to see such an effort go down the drain because of the hours you have put in the company to make it profitable and the cash investment already spent. Here is where commercial insurance swoops in to save the day.
While it may seem complicated in the beginning, you will soon discover that there are endless opportunities. Knowledge in commercial insurance will help you determine what part of the business to cover and how to make savings while doing it.
Understanding Commercial Insurance
Before committing to any particular form of commercial insurance, you must understand why your business might need one, whether it's a large or small enterprise. First, having it will ensure that your assets are protected from any liability in case your business causes damages to other people.
How Does Commercial Insurance Work?
Typically, this refers to a one-year contract that assumes all your business liabilities for a predetermined period based on an agreed fee. The insurance company evaluates your assets and the kinds of liabilities your business is most likely to face to arrive at the amount. Also, they can do valuations based on what your partners, landlord, and vendors expect from your business.
Four Types of Commercial Insurance your Business May Need
No two businesses are alike and every business needs a unique coverage.
1. General Liability Insurance
Here, the policy covers your business from property damage or bodily harm you might cause to others while working for you. The coverage might include falls or slips of your workers and any liability that your product might cause. General liability isn't limited to damage protection only. It covers you from any legal costs that you might face in your defense against a legal suit. The coverage also pays for damages in case you lose the lawsuit. An essential rule of commercial insurance is that all businesses need a minimum general liability insurance policy.
2. Contents and Buildings Insurance
Here you take a policy that covers the building, the contents inside and around. The policy also extends to protect your business assets while in transit or off-premises. Content and building insurance are applicable if your bank finances your business/investment. However, you can still take an individual premise and content insurance to protect your investment. To determine if you need individual content and premise insurance, a business owner considers if the investment is easily replaceable if there is a disaster.
3. Commercial Auto Insurance
If your business has any vehicles to help with operations (whether hired or owned), you must procure a commercial auto insurance policy. The cover protects against any damage to the cars and uneventful accidents while the vehicle is operational. It's a state law that all commercial vehicles belonging to a business must have a commercial auto insurance policy. If your business owns commercial vehicles bigger than a pickup truck, the premium should be higher to give you better auto limit protection.
4. Workers Compensation Insurance
When you own a business, you also undertake the responsibility of the workers that operate under you. It means covering their medical bills if they get injured on your premises.The policy also covers your workers' salaries if they are laid off because of the injuries they sustain while working under your instructions or business. Medical bills are often costly, especially if the injuries are severe. The recovery progress might even take years. It's essential to undertake this policy because it runs until the worker recovers from the injuries. In some states, the cover is mandatory for employees who don't own any stakes in the company and are non-family members. Also, these policies are only accessible via private insurance companies.
Understanding Commercial Insurance Pricing and How it Works
Commercial insurance companies determine the pricing by evaluating your business's operations and the likeliness of the risks insured. Here they adjust the rates by accurately choosing if the risk might occur. While commercial insurance pricing is often complicated, there are only two ways to go about it.
The Liability Rating Coverage
If you undertake a coverage, the insurance company becomes liable to protect your business. Therefore, they must determine the liability risk of your business. Insurance companies compare your business to other similar businesses like yours and put you in a pool to make accurate assumptions. If you face any damages, other customers' premiums will be used to compensate you. The general rule is to consider your company's revenue and multiply it by the loss rate from the resulting risk pool. This method is usually spot-on for retail and manufacturing businesses but not applicable to other types of companies. For instance, the rating of a construction company is achieved by using payrolls instead of business revenue. Regardless, ensure that you closely follow your business's liability premium and keep it updated.
Property Coverage Rating
It follows similar principles to the liability ratings but can be a tad more complex to grasp. It's because different properties don't share the same price. To achieve this rating, evaluate the business type and contents inside and around the premises. Another factor that insurance companies use to determine property ratings is the construction of the building. Here, consideration comes from the likely threats and the eventuality of them happening. For instance, a wooden construction building is more susceptible to damage by wind or fire than a building made of metal or brick. Location is also a vital aspect when determining your business's premise ratings. The ratings increase if you are in a place prone to tornadoes, hurricanes, floods, earthquakes, and wildfires. To get an estimate of your rating, an insurance company condenses all the likeliness of these catastrophes. The sum is calculated by determining the property exposure rate and multiplying it to the total insured value of your business.
Summary
Taking the time to understand how commercial insurance companies work is the best way to protect your business. You can learn more about the exposures your enterprises are likely to face by consulting insurance experts.
Remember, no companies are the same. Therefore you can get a tailor-made insurance cover for your business. Give us a Call Today, to Get a Free Quote