The Expert Podcast

So, what is commercial insurance, and how does it compare with residential insurance? Well, both types of insurance fall under what's called Property and Casualty Insurance, and it's split into two parts: personal lines and commercial lines. Personal lines are something you're probably very familiar with; you have auto insurance on your vehicle, you may have a homeowner's insurance policy, and you may have an umbrella policy or other types of personal lines. It covers your person and your family. Commercial lines insurance has similar coverages, but they cover the specifics of a business.

For example, you may have commercial auto insurance that covers your business vehicles if you have cars on the road that are making deliveries or are part of your fleet. This is not covered under your personal auto insurance because business vehicles have different types of use and risks. A commercial auto policy will cover different drivers, routes, and patterns of driving every day. Hence, a personal lines policy cannot handle those kinds of risks. Commercial auto is especially important if you're using trucks or other heavier-duty vehicles.

What other types of commercial lines are there? Well, there’s workers' compensation (work comp). If you have a business and someone gets hurt on the job, you need workers' comp insurance to cover those injuries. You also need different types of liability coverage, such as premises liability. For homeowners, if someone falls on your steps and gets hurt, they may be covered by your homeowner's insurance. However, a business needs more coverage because it has more people visiting the premises daily. While you may have someone visit your house once or twice a week, a business could have 100 people visiting daily, requiring more extensive and expensive coverage due to the increased risk. If your business involves forklifts or large inventories, these factors increase the "perils" that could lead to claims against your policy.

There are also coverages like professional liability. For instance, if you're an accountant and make a mistake on someone’s bookkeeping, it could result in a financial loss for that person. This is where professional liability coverage comes in. There's also E&O (errors and omissions) insurance, which might be necessary if, for example, you're a real estate title examiner and make a mistake on a title search; the insurance would cover the cost to make the property buyer whole again.

Businesses, depending on the industry, face different risks than individuals do, so their coverages must reflect that. There are some consolidated policies, like a BOP (Business Owner Policy) that covers a wide range of companies up to a certain size, and a CPP (Commercial Package Policy) which may offer more coverages. However, it's essential to tailor coverages to the risks and potential losses your business might face. You don't want a situation where a successful business suffers a loss, damage, or injury involving an employee, customer, or bystander that costs you the business.

Nowadays, there's an increasing risk of cyber liability. If your company gets hacked, and your computers get shut down by ransomware, it could affect your business operations. You need coverage to ensure it doesn’t put you out of business. If hackers access your customer information, your customers could sue you.

Another important coverage is BI (Business Interruption). If, for example, a car crashes into your business's front window, causing a two-week closure, BI coverage can compensate you for the income lost during that period. Business coverages are much more complex than individual policies, so it's crucial to talk to your broker to review your policies and ensure they address the risks your business could face.

You don’t want to underpay for insurance and end up inadequately covered, nor do you want to overpay for unnecessary coverage. Working with a qualified broker specializing in commercial policies is essential because an agent who only deals with personal lines may not ask the right questions to protect your business. After all, you’ve worked hard to build your business, and you want it to be successful in the long run.

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