Business Insurance 101
What Type of Insurance is Commercial Insurance?
Commercial insurance refers to insurance that is used for business purposes and can come in two forms, property or liability insurance. Texas does not mandatorily require business insurance, however, getting insurance is advisable so that you do not end up having to pay for any injuries or damage that occurs in the course of your business.
There are a wide variety of insurance types under the commercial insurance umbrella:
Business Owner Insurance Policy
Commercial Package Policy
Commercial Auto Insurance
Commercial Property Insurance
Business Liability Insurance
Commercial Health Insurance
Commercial Life Insurance
Directors and Officers Insurance
Business interruption Insurance
Hazard Insurance for Business
Landlord Insurance for Business
Inland Marine Insurance
Commercial Marine Insurance
Business Crime Insurance
Hired and Non-Owned Insurance
Workers Compensation Insurance
Business Owner's Insurance Policy (BOP)
Business Owner's Insurance Policy is a type of insurance policy that combines business property insurance and general liability insurance. Although these two areas are the main focus of this policy type, as a business owner in Texas, you can also customize this policy to add other areas of coverage such as data breach coverage. The BOP type of insurance is often used by small businesses to provide balanced coverage over the business as well as its property. Some situations where this insurance policy might be suitable include:
As coverage for business assets that can be stolen or damaged
For protection against data loss
As insurance for your business structure against fire or other disruptions
Commercial Package Policy (CPP)
Commercial Package Policy (CPP) is a type of insurance policy that combines the benefits of Commercial Property Insurance and Commercial General Liability Insurance. The CPP is often more flexible and can be customized to suit the specific requirements of your business. Using CPP, risk coverage can be spread over a greater variety of risks, and asides from the obvious property and liability risks contained in the Commercial Property Insurance and Commercial General Liability Insurance, some examples of its coverage include:
Property in transit
Employee Benefits Liability
The Commercial Package Policy is an insurance type that provides coverage over a broad range of issues; however it is still advisable that you talk to a properly licensed insurance agent to determine how to customize this policy to suit your business needs.
Commercial Auto Insurance
Commercial Auto Insurance is a type of insurance policy that protects business-owned vehicles against accidents or any other unforeseen incidents that might occur while a company-owned vehicle is being used for work. In the State of Texas, all business-owned vehicles must have valid Commercial Auto Insurance.
Commercial Auto Insurance is useful if:
You or an employee causes damage to property while driving a company car
You or an employee hit a pedestrian with the company vehicle and needs to pay medical bills and other associated costs.
The areas of coverage of commercial auto insurance include :
Collision coverage
Bodily injury coverage
Comprehensive coverage
Personal injury protection
Commercial Property Insurance
Commercial Property Insurance is a type of insurance that covers the building or structure from which a business is run. The insurance is put in place to aid in the repair or replacement of any office equipment or the office building in itself. This form of insurance may also be used to pay for loss of income if your business is unable to operate properly for certain periods due to an incident covered by the policy.
Commercial property insurance is often divided into three different coverage types and they include:
Basic form policies offer the least amount of coverage for damage caused by incidents such as windstorms, explosions, fire, collisions, and lightning.
Broad form policies cover all the types of damages included in the basic form policies and also extend to other damage such as structural collapses, falling objects, damage from leaking appliances, and damage from falling snow, ice, or sleet.
Special form policies are the most extensive and provide coverage for all forms of damage except those specifically excluded in the policy document.
It is important to note that there are a variety of property-specific coverages which are directed at specific forms of commercial property or specific damage to commercial property. Some of these types of coverage include: Builders' Risk Policy, Flood Insurance, and Electronic Data Processing Coverage.
Before deciding on what insurance policy might be suitable and making a purchase, it is advisable that you contact a properly trained and state licensed insurance agent in Texas so that you are made well aware of the differences between the different coverage types and end up purchasing the policy that is most suitable for your business.
Commercial Property Insurance can provide protection from a variety of incidents such as a situation wherein an employee or customer steals part of your inventory or part of your building is engulfed with fire.
Business Liability Insurance
Business Liability Insurance is also referred to as Commercial Liability Insurance or Commercial General Liability Insurance and protects your business against claims of liability against you or your employees for bodily injury, personal and advertising injury as well as property damage. Under this insurance type, there are also different types of coverage and some of the most common policy coverage types include:
General Liability
Excess Liability
Professional Liability
Errors and Omissions (E&O)
Commercial Umbrella Insurance
Cyber Liability
Landlord Liability
Employment Practices Liability
Product Liability
Business Liability Insurance can be used to provide coverage in a situation where you or an employee makes a mistake and is subsequently sued for such mistake. Your liabilities are covered by the business liability insurance.
Commercial Health Insurance
Commercial Health Insurance is a coverage that employers and business owners can get to provide financial protection for employees in the event of illness or injury. This type of insurance is typically obtained by Texas employers for all employees in a particular group or for the company as a whole. The resulting group rate is less expensive for the employees, compared with what they would pay for the same level of coverage on their own.
There are generally three options for health insurance for employees:
Self Insured or Self Funded - Under this model, an employer can insure a health plan individually or in collaboration with other employers. When the business insures alone, the risk is spread only among the employees. However, if the insurance is done alongside other employers, the risk is pooled and shared across all the different employers in the group. For policies that seek to share the risk across different employers, authorization must be sought and obtained from the Texas Department of Health.
Group Plan - Group healthcare plans are governed by both federal and state laws and there are three main categories; small and large employer plans and association health plans. A small employer plan is particularly for businesses with not more than 50 employees and must cover a minimum set of health issues defined as Essential Health Benefits. Large plans do not have to cover the Federal Essential Health Benefits but must cover certain benefits as determined by Texas law. Association plans enable different employers to come together for the purchase of healthcare plans.
Or individually assisted purchases - Under this type, an employer can contribute a figure regulated by law into a qualified small employer health reimbursement arrangement (QSEHRA) and employees can use this contribution to purchase individual healthcare plans.
Commercial Life Insurance
Business Life Insurance provides compensation for you and your employees in the event of death.
The top 3 uses of commercial life insurance are:
Group life insurance,
Keyperson Insurance,
Buy/Sell Agreement.
Group Life insurance, similarly to employer-provided health insurance, is offered by some Texas employers as part of the employment package. Usually it is a Term life insurance policy.
The Keyperson Insurance (also known as Keyman or Key woman insurance) protects the life of the main figures behind the business. This can be an owner, members of the board, or any other employee who is considered a key person for the business. In case if such a person dies, there is a death benefit, which is meant to help the business rebuild. Such policies help offset the costs of hiring and training the replacement. .
The Buy/Sell Agreement enables a business to continue operations after the death of the business owner or a partner. The Buy/Sell agreement typically stipulates the amount of money it would cost the surviving business partners to buyout the business from the surviving family members. A death benefit from the life insurance is used to finance the buy/sell agreement.
Directors and Officers Insurance
The Directors and Officers Insurance helps to provide cover for damages and other costs that may arise out of lawsuits and other claims that may be leveled against your business' directors or officers that have been duly insured. The Directors and Officers Insurance typically protects the assets of the insured persons and may be applied to some of the following:
Civil fines and penalties
Cost of extradition fees
Bail bond costs
Legal expenses
There are three typical insurance clauses for a Directors and Officers Insurance policy and they are:
Side A (Non-indemnified) - for coverage to directors and officers that are not insured by the business due to state law or the financial capacity of the business.
Side B (Indemnified) - for coverage to the business when it provides indemnity to its officers and directors
Side C (Entities security coverage) - Provides coverage to the business for security claims which have been brought against it.
While this form of insurance typically serves as indemnity against management errors and omissions, it typically does not cover illegal actions that are intentionally done.
Business Interruption Insurance
Business Interruption Insurance is a type of coverage that insures a business against incidents that result in lost income as a result of a disaster or peril which has been included in the coverage policy. The policy will typically cover the costs of any repairs, lost income to the business while repairs are being carried out, and operating expenses. It is important to note that this insurance type is typically subsumed in another business owner insurance policy.
There are four types of coverage that are normally associated with Business Interruption Insurance and they include:
Business Income Coverage
Extra Expenses Coverage
Contingent Business Interruption Coverage
Civil Authority Coverage
Business Interruption Insurance is only useful against incidents that have been included in the policy and some examples of typical occurrences that are insured against include fires, earthquakes, windstorms, and theft.
Hazard Insurance for Business
Business Hazard Insurance is a type of insurance that is typically available to small businesses as coverage for damage that may occur to the property where the business is located or to equipment that is used to run the business. Hazard Insurance is a form of property insurance that typically covers items like furniture, personal property, computers, and valuable documents. The coverage of hazard insurance is usually aimed against incidents such as:
Fire
Vandalism
Explosions
Building collapse
Lightning and hail
Theft
Landlord Insurance for Business
The Landlords Insurance is a very useful insurance type that indemnifies property owners against risks and claims that may arise from a rented property. Landlord's Insurance helps landlords deal with a variety of risks such as vandalism, fire, accidents, theft, employee claims, and tenant claims.
Coverage that is available under the Landlord Insurance is broken down into three categories:
Property - this typically covers the building and the business property including outdoor premises and also covers equipment of the business.
General Liability - the general liability cover insures against claims for damage or injury to individuals and could also protect against lawsuits for things like false advertising or wrongful termination.
Loss of Income - This insures against a situation in which the building may be inhabitable for a period of time and the loss of rental income that ensues.
As a Landlord, you may also consider specific insurance types such as Boiler and Machinery Insurance coverage. You might also consider an emergency Repair Coverage plan to be inserted into your insurance package to help provide additional funds should there be a need for an overhaul or emergency construction on your property.
Inland Marine Insurance
Inland Marine Insurance is an extra bit of insurance coverage that insures your equipment in transit on land. This type of insurance is useful for businesses that have to transport tools, merchandise, or equipment by ensuring that extra protection is made available in the event of any mishap, accident, or perils. This type of policy is available for a wide range of equipment types and coverage areas such as:
Musical instruments
Art galleries and art equipment- also known as a Fine Arts Floater
Cellular Communication Towers
Dealers Service Coverage
Billboard Coverage
The Inland Marine Insurance is typically more encompassing than other regular property coverage types and typically provides coverage for all possible risks.
Commercial Marine Insurance
Commercial Marine Insurance is a type of insurance coverage available to businesses that do business over water either through transportation of goods, fishing, oil exploration, or any other type of over the water activity. Commercial Marine Insurance helps mitigate risk from losses or damage to sea vessels. Commercial Marine Insurance is available for all types of sea vessels ranging from fishing trawlers to tankers, recreational boats and may also be used to insure a boat factory or a whole marina. Interested persons may choose specialized coverage types to suit specific needs or adopt a comprehensive package.
The three types of coverage that are typically available under commercial marine insurance type are:
Cargo Insurance - This type of coverage applies to the cargo that is transported aboard a vessel and provides protection against incidents of damage and theft. Some policies may also provide cover for additional losses.
Marine Liability Insurance - Marine Liability Insurance provides comprehensive protection against a third party. This coverage type covers the contractual liabilities, operations and completed operations and products liability exposure of the insured party.
Hull Insurance - this is a special coverage type that protects against any type of physical damage to the vessel, its machinery, and equipment. This type of insurance cover is available to all water vessels. Coverage under this insurance type is typically distinguished by the location of the occurrence, that is, whether the incident occurred in a blue water or brown water location.
Business Crime Insurance
Business Crime Insurance is an insurance coverage available to businesses to protect against business-related crime. Under this policy, businesses can insure merchandise, cash, assets, and property loss arising from embezzlement, fraud, theft, misrepresentation, and forgery. As with other types of insurance, a Business Crime Insurance policy can be tailored to suit the specific needs of the organization. Contact a licensed insurance agent to discuss your business insurance needs.
You could also consider Employee Dishonesty Insurance which provides protection against losses due to employee embezzlement, theft, or fraud. Additionally, you may adopt a more specific coverage type like Computer Fraud coverage which basically insures against theft of securities or money using a computer that is located on the insured premises.
Hired and Non-Owned Insurance
Hired and Non-owned Insurance is a type of insurance that applies to vehicles that are not owned by the business but are used to carry out functions for the business. A Hired and Non-Owned Insurance coverage can cover car rentals for the business as well as employee and agent vehicles that are used for the business. It is important to note that this insurance coverage is for the business and not the operator of the vehicle, as such the driver will be expected to have insurance as well.
Hired and Non-owned Insurance can be included in your business' already existing Auto Insurance coverage or General Liability policy.
Workers Compensation Insurance
Worker's Compensation Insurance is a type of insurance that protects the business in the event of a workplace injury to an employee or yourself. In Texas, it is not a requirement for private employers to have Workers Compensation, unless this private employer contracts with a government entity. Nevertheless, Worker's Compensation Insurance is very essential to ensure that the business is not laden with sudden expenses. This insurance coverage can be used to help pay for medical expenses if a worker gets injured or is sick as a result of work. It may also be applied to funeral expenses and benefits to an employee's family in the event of a work-related death.
What is a Premium in Commercial Insurance?
A premium is the money paid for the business or commercial insurance that a party obtains. Premiums are typically paid at the start of the insurance cycle and subsequently, at regular intervals to keep the chosen insurance package active. Commercial premiums may be paid in full at the start of the policy or at agreed intervals, usually using the 3rd party premium finance solution. A failure to pay a premium could result in the cancellation of the policy
What is a Deductible in Commercial Insurance?
A deductible is the amount of money you have to pay out-of-pocket before your insurance policy becomes applicable. Deductibles may be calculated at a predetermined rate or by percentage of the total coverage.
Is There a Deductible in Business Insurance?
Deductibles are applied to several types of business insurance coverage and it is believed that this helps keep the premium costs at a relatively low and affordable rate.
Some examples of commercial insurance types that have deductibles include:
Commercial Property Insurance
Business Liability Insurance
Business Owners Policy
Worker's compensation Insurance
Business Interruption Insurance
Commercial General Liability Insurance
Commercial Health
An example of commercial insurance types that do not have deductibles include:
- Commercial Life Insurance
What are Policy Limits in Commercial Insurance?
A policy limit is the extent to which an insurer will be liable in the event of a claim. A policy limit in commercial insurance is the agreed maximum liability that the insurance provider can pay for in the event that one of the insured situations occurs. The extent to which a policy is limited is usually determined by the amounts paid as premiums. Limits may be set based on each occurrence or as an aggregate of what will be paid throughout the policy's lifespan.
What is Covered by Commercial Insurance?
Commercial Property Insurance - Covers physical business structure, personal business property such as computers, tools, and other equipment.
Commercial General Liability Insurance/Business Liability Insurance - Covers property damage, personal and advertising injury, liability for bodily injury.
Business Crime Insurance - Covers forgery, employee theft, fraud, issues with copyright, burglaries.
Worker's Compensation - Covers employee liability, lost wages, medical expenses, survivor benefits.
Business Interruption Insurance - Covers loss from fire, vandalism, theft, windstorms, aircraft, vehicle and civil commotion, lightning and vandalism.
Business Owner Insurance Policy - Covers property damage, lawsuits, employee dishonesty, money and securities, bodily injury.
Hired and Non-owned Insurance - Covers employees personally owned or leased vehicles.
Commercial Auto Insurance - Covers liability and physical damage, uninsured motorists, medical payments, hired cars.
Commercial Health Insurance | Covers sicknesses and illnesses depending on coverage specification.
Commercial Life Insurance | Protects business from sale after death, protect against the sale of business assets.
Directors and Officers Insurance | Protects officers and Directors of a business against negligence, omissions, and misrepresentation or misleading statements.
Landlord insurance for Business - Covers settlements, legal fees, medical expenses.
Inland Marine Insurance - Covers tools, equipment, vandalism, physical damage, theft, or total loss of cargo.
How Much is Business Insurance?
The cost of your business insurance will typically depend on the extent of coverage you need and the types of insurance you go for. Below are a couple of occupations and the types of coverage that are typically required for that profession and the range of the types of coverage needed:
General Contractor
General contractors in Texas are typically expected to have General Liability Insurance, Commercial Auto Insurance, Worker's Compensation Insurance, Professional Liability Insurance, Builder's Risk Insurance, and Inland Marine Insurance. The average cost of General Liability Insurance is $1,761.
Bar/Restaurant Owner
An average bar or Restaurant owner in Texas may have General Liability Insurance, Commercial Property Insurance, Business Interruption Coverage or Loss of Income Coverage, Flood Insurance, and Inland Marine Insurance.
Doctor
A Doctor in Texas will typically have a form of Healthcare Insurance for patients that visit the hospital. Doctors will also have General Liability Insurance, Commercial Property Insurance, Business Liability Insurance (Medical Malpractice), and also Worker's Compensation.
Attorney
Lawyers in Texas can purchase General Liability Insurance to insure the premises where the firm may be located against a client or employee property damage and injuries. Worker's Compensation is also another type of insurance that is typically obtained by lawyers. Other common coverage types include Business Owner's Policy, Legal Malpractice (professional liability), and Cyber Liability Insurance or Computer Fraud coverage.
Despite the above suggestions and what is deemed as generally acceptable for your profession, it is very important that you do not purchase insurance policies for your business without discussing your options with a knowledgeable state-licensed commercial insurance agent. This will ensure that you are made aware of all the coverage types that will be beneficial to you and also ensure that you get accurate price estimates determined by your peculiar circumstances.
How to Save on Commercial Insurance in Texas?
Below are the 8 things you can do to ensure that you are given the best possible deal on your insurance and can save some money on your insurance purchase:
Talk to a properly licensed Texas commercial insurance agent or professional
Obtain multiple quotes of the same coverage type from different brokers before deciding on a policy.
Combine different coverage types into a single policy
Improve the security and safety of your business and eliminate or reduce potential hazards
Ask a lot of questions before settling on a particular policy.
Ensure that you understand all the parts of your policy,especially the exclusions.
Consider the amount being paid as a deductible
Do not be afraid to ask for discounts and other potential benefits from your provider.
How to Get Business Insurance?
There are a variety of ways through which you can purchase business insurance, some of these ways include:
Using an existing properly licensed Commercial insurance agent
By getting recommendations for a new agent from trusted sources like friends and family
By visiting reputable online comparison sites or conducting an online search for highly-rated and properly licensed insurance agents
By visiting the physical offices of insurance brokers and insurance agents
By visiting the Texas Department of Insurance to find accredited insurance brokers and insurance packages.
Before you decide on which agent to use and what package to adopt, make sure that you do as much research as possible on the types of insurance that may be applicable to your business as well as on the appropriate insurance broker or agent to use. For the best result and the best packages, make sure that you use a state-licensed insurance professional.
Stress the need to do as much research, as possible - use the state-licensed insurance professional, to help you find the best (coverages and price) option.
Insurance Financing
Commercial Premium Financing is the process whereby a third-party agency lends money to a business for the purchase of an insurance policy. These arrangements are usually for a short term period and typically require external collateral with an interest rate that is determined by the lender.
Premium financing is available to a wide range of commercial insurance types in Texas and they include:
Commercial Life Insurance
Business Liability Insurance
Commercial Auto Insurance
Commercial Property Insurance
Worker's Compensation Insurance
The average and maximum rates for financing commercial insurance can be found in the Texas Finance Code. The Finance Code contains specific limits for different types of insurance types such as automobiles which are contained in Texas Finance Code Section 348.104. Nearly all commercial premium financing is carried out by third-party financing companies including banks. It is important to note that using a premium financing company may cost you more than if you made a purchase of your insurance yourself. This is because the repayments often attract interest and a failure to pay any sum due to the financing agency could also lead to the termination of the policy.
What is Unemployment Insurance in Texas?
Unemployment Insurance, also known as Unemployment Benefits, refers to an employer-led program that provides temporary financial relief to persons who are unemployed in Texas and are eligible based on the requirements laid down by the State. The unemployed status of the beneficiary must not be due to personal faults such as misconduct or voluntary resignation.
Who Pays for Unemployment Insurance?
Employers pay for Unemployment Insurance. Under Texas law, employers pay unemployment insurance taxes that cover unemployment benefit payments. Employees do not contribute towards this payment or make any payment towards this insurance and Texas employers cannot legally make deductions for this purpose from an employee's paycheck.
