Important Coverages & Restrictions:
Commercial Insurance is much more complicated than residential coverage because, for the most part, the insurance hasn’t been “packaged”. Some types of coverage, such as for retail outlets, strict office environments and small sub-trades have been allowed to be put onto packages, meaning, a group of coverages that are broad in scope and include a certain amount for most risks faced by this type of enterprise. Most businesses fall outside of this “package environment”, however, the insurance industry is in the process of developing more package policies, as they are much easier to rate and underwrite, as well as providing broader benefits to the policyholder.
So, this means that the majority of commercial insurance policies have to be “tailored” to meet the specific needs of the client. And there are so many different types of businesses located in many areas and in various types of structures, that this can be time consuming and costly. Hence the Minimum Policy Premium has risen drastically in the last few years due to this and coupled with the fact that automation of commercial insurance is relatively in its infancy stages. Due to the economy, automation and globalization, many entrepreneurs are now running successful businesses from their home premises, and insurance carriers have responded to this, and attempted to deal with the preclusive Minimum Policy Premium issue, by developing Home Based Business coverages (see special section relating to this topic).
IF YOU NOW HAVE, OR ARE CONSIDERING OBTAINING BUSINESS INSURANCE, KEEP THE FOLLOWING POINTS IN MIND:
There are always Co-Insurance clauses which stipulate to what percentage your insurance limits need to be carried in relation to actual values. If your insurance limits fall UNDER the percentage you are supposed to carry, you might find yourself in a position of sharing in an insurance claim in addition to the policy deductible. The amount of coverage you should carry also depends on whether your coverage is on an Actual Cash Value or Replacement Cost basis. It is, therefore, very important that you discuss and keep policy limits current with your insurance agent. Please keep in mind that this situation should also be addressed if you make any changes to your operation throughout the year.
If there are any by-laws which would affect the ability or cost to repair or rebuild in the event of a total or partial loss, these should be discussed with your agent. As policies vary greatly between carriers and types of businesses, there is no way of knowing whether your policy automatically protects you against this, and to what extent, however, you can usually have the coverage extended or added to your policy.
Replacement Cost (new for old), sometimes also referred to as Rebuilding Cost, can be obtained for many types of business insurance, although it’s not necessarily automatic. Certain types of property, such as Stock in retail operations, are only insured for the wholesale cost to replace, NOT the retail cost it would have sold for. It is beneficial to carry this coverage in most cases, so check with your insurance agent if it isn’t listed on your policy.
Business Interruption & Extra Expense:
These coverages pay for “consequential” losses brought about by an insured loss. Loss of usual business income, profits or gross earnings under the Business Interruption Forms. Or the extra expense, over and above your physical damage loss, for setting up your operation right away from another location so you can carry on your business. There are many types of coverages for Business Interruption, so discuss this with your agent.
Other Optional Coverages:
- Rental Income
- Earthquake/Flood/Sewer Backup
- Glass Breakage
- Sign Floaters
- Crime Coverage for Money
- Boiler & Machinery
- Additional Locations