# Understanding Commercial Insurance: Protect Your Business

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*— Investopedia / Yurle Villegas*

## What Is Commercial Insurance?

Commercial insurance, often referred to as business insurance, safeguards companies from the financial impact of unexpected events like lawsuits, natural disasters, or accidents. This type of insurance varies based on the specific risks a business may face, offering coverage options such as property damage, legal liability, and employee-related risks. By securing the right coverage, businesses can mitigate potential losses and maintain operational stability even when the unexpected occurs.

### Key Takeaways

*   Commercial insurance safeguards businesses from financial losses due to unexpected events like lawsuits, natural disasters, or accidents.
*   Different types of commercial insurance include general liability, property insurance, professional liability, and business interruption insurance.
*   Businesses should assess their insurance needs based on potential risks, which vary by industry and location.
*   Commercial policies differ from personal insurance by specifically protecting businesses rather than individuals.
*   Consulting with a reputable and licensed insurance broker can help businesses find suitable coverage.

## Understanding the Function of Commercial Insurance

Small business owners must carefully consider and evaluate their risks because they may have personal [financial exposure](https://www.investopedia.com/terms/f/financial-exposure.asp) in the event of a loss. Commercial insurance shields business owners from losses due to unforeseen events they can't cover alone, allowing them to operate without excessive risk.

If you need business insurance, consult a reputable, licensed broker. Find licensed agents through your state’s department of insurance or the [National Association of Insurance Commissioners](https://www.investopedia.com/terms/n/nainsurancec.asp).

> **Fast Fact**
>
> Commercial policies are different from personal lines insurance because they protect a business, not an individual.

## Exploring Different Types of Commercial Insurance

Federal regulations require certain types of insurance such as workers' compensation. Additionally, certain states may require certain types of businesses to have additional coverage types. In most situations, it's advisable for business to protect themselves by having coverages that aren't legally required. Here are seven common types of business insurance:

### An Overview of Commercial General Liability Insurance

[Commercial general liability](https://www.investopedia.com/terms/c/commercial-general-liability-cgl.asp) insurance is a type of policy for all businesses. It's considered comprehensive insurance, although it does not protect against all risks. General liability provides coverage for bodily injury, property damage, medical expenses, libel, slander, defending lawsuits, and settlement bonds or judgments.

### Understanding Professional Liability Insurance

Unlike general liability insurance, which is for any business, [professional liability insurance (PLI)](https://www.investopedia.com/terms/p/professional-liability-insurance.asp) is designed for businesses that provide services. Coverage is for loss caused by the service provided. It protects against expenses related to malpractice, negligence, or errors.  

### Insights Into Commercial Property Insurance

[Property insurance](https://www.investopedia.com/terms/p/property-insurance.asp) is designed for businesses with significant physical property, such as equipment, signage, inventory, and furniture. It protects the business from losses in events such as fire, storm or theft. Property insurance can cover, for example, damage to things like inventory, computers, furniture, or signage.

> **Warning**
>
> Commercial property insurance typically doesn't cover the costs of events like floods and earthquakes. If your area is at risk for these events, you'll need a separate policy.

### Insurance Considerations for Home-Based Businesses

If you're operating a [home-based business](https://www.investopedia.com/articles/personal-finance/120815/licenses-and-permits-you-need-your-homebased-business.asp), you will likely need additional coverage for equipment and inventory. Standard homeowner’s policies don’t typically cover home-based businesses like commercial property insurance covers businesses. You can add home-based business insurance to a homeowner's policy as a rider for a small amount of coverage for equipment and a small amount of liability coverage.

> **Fast Fact**
>
> A business owner's policy is an insurance package that is often ideal for small businesses and home-based businesses. It is essentially typical insurance options in one bundle so you can buy it efficiently and save money.

### The Essentials of Product Liability Insurance

Product liability insurance is designed for businesses that are involved with products, such as manufacturers, wholesale distributors, and retailers. Product liability insurance protects a business from costs associated with damages caused by products, such as a defective product causing bodily injury or harm. Without product liability insurance, a business can be vulnerable to paying for expensive lawsuits.

### Key Points About Business Vehicle Insurance

Any vehicles used for business should be insured. Whether you have vans, busses, tractor trailers, or passenger cars, you will need insurance in case of damage to the vehicles or cargo, or injuries to others. Each state has a minimum amount of required insurance. Several factors can affect the price of vehicle insurance, such as the driver's driving record and the condition of the vehicles.

### Navigating Business Interruption Insurance

[Business interruption (or continuation) policies](https://www.investopedia.com/terms/b/business-interruption-insurance.asp) are a type of insurance that is especially applicable to companies that have physical locations, such as retail stores or manufacturing facilities.

Business interruption insurance [compensates a business](https://www.investopedia.com/terms/g/gross-profits-insurance.asp) for its lost income due to events that cause a disruption to the normal course of business. It's typically added as a rider to a property insurance policy or as part of a business owner's policy. Policies may also include a [civil authority provision](https://www.investopedia.com/terms/c/civil-authority-clause.asp) that details compensation in the event of a government action that closes the business.

## How Much Does Commercial Insurance Cost?

The price of [a commercial insurance policy](https://www.investopedia.com/the-best-commercial-business-insurance-11705329) will depend on a number of factors about your business and the insurance coverage. Progressive reports the median monthly cost of a business owner's policy to be $70. The Hartford shares that the median monthly cost of its commercial policies is $55.

## What Affects How Much Business Insurance Costs?

Several factors can influence the price of a business insurance policy, including the number of employees you have, the location of your business, and the amount of coverage you want. Generally, the more employees you have and the more coverage you need, the more expensive your policy will be. Prices also vary from region to region depending on the associated risks.

## How Do You Get Commercial Insurance?

You can get commercial insurance through an insurance agency that provides the type of policy you need. You can work with an insurance agent at an insurance company who can give you a quote and guide you through your options and application process. You can often get a policy online or by calling the insurance agency.

## The Bottom Line

Commercial insurance is essential for safeguarding businesses from [losses](https://www.investopedia.com/terms/a/advance-loss-profit-alop-insurance.asp) arising from lawsuits, accidents, natural disasters, and more. By evaluating your company's specific risks, you can choose from various types of insurance such as general liability, professional liability, and property insurance, among others, to best protect your business. Consulting with a licensed insurance broker or your state’s department of insurance can help you find appropriate coverage. Ensuring you have the right insurance allows your business to withstand potential financial setbacks and operate with reduced risk.

> **Article Sources**
>
> 1.  U.S. Small Business Administration. "[Get Business Insurance](https://www.sba.gov/business-guide/launch-your-business/get-business-insurance)."
>     
> 2.  Progressive. "[How Much Does Business Insurance Cost?](https://www.progressivecommercial.com/business-insurance/business-insurance-cost/)"
>     
> 3.  The Hartford. "[How Much Is Commercial Insurance?](https://www.thehartford.com/commercial-insurance/cost)"