7 Common Types of Commercial Insurance Coverage

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At Oakwood, we’re proud of our broad base of knowledge when it comes to understanding commercial risks. Over the years, we’ve developed an extensive expertise of certain risks and the skills needed to underwrite them. Because of this, our underwriters know and understand what coverages are necessary to protect these businesses. Learn more about the type of policies we cover.

Business owners face a challenge when identifying the business insurance they need. You want an insurance policy to comprehensively protect your company. However, you also want to avoid paying for coverage your business may not need. By identifying the coverage you need, you limit the financial burden on your business.

What are some insurance coverages to consider?

Coverage for Business Properties

We’d be remiss if we didn’t start off with our bread and butter. If your business owns a property, then you want coverage for the building and the items in the building.

Commercial property insurance depends on the type of property owned by the company. For example, a policy for an office building differs from the policy provided to a restaurant. The risks differ between these two property types. Ideally, you want coverage against most risks to a property itself. You also want to cover risks to the business that relate directly to the property.

Some policies offer coverage for lost income when a covered peril prevents a business from operating. The business interruption coverage depends on the policy you purchase.

Business insurance protects against major financial losses. Therefore, every company needs coverage for common risks. While the amount of coverage depends on the perceived risk to your business, you want to obtain liability protection, coverage for any properties the company owns and protection for employees.

Voluntary Property Damage provides coverage for damage to property in the care, custody, or control of the insured. The property damage must be caused by an occurrence and result from operations that are a part of the insured’s business and take place away from any premises the insured rents, owns, or occupies. Limits up to $25,000 per occurrence / $25,000 aggregate are available. A minimum $250 deductible applies.

Let’s look at how this coverage works:

The insured was hired to clean a customer’s carpet. In the process of doing so, the insured damaged the carpet. Normally, the claim wouldn’t be covered due to the Care, Custody, or Control exclusion. If Voluntary Property Damage is purchased, however, it would cover the loss after the deductible is applied.

Additional Commercial–But NOT Property–Coverage to Consider

Worker’s Compensation Insurance Coverage

Any business with an employee should obtain appropriate worker’s compensation coverage. Often, this is the law. The business insurance protects your employees from accidents, injuries or work-related illnesses. It allows your employees to seek assistance without facing high bills or expenses while they are unable to work.

Exact standards for workers’ comp coverage depend on the state. However, most businesses want the policy when they decide to hire an employee. You may qualify for some exceptions if the other individual is a partner in the company. But the standard usually applies to most businesses and situations.

Liability Protection

Liability insurance is a necessity for every company. Even a company with a low perceived liability risk should buy a policy with liability protection.

The policy limits the cost to a business when a client or visitor to your company sues for injuries that occur on company property or as a result of using a company’s services. A business with a low risk may not need a large amount of protection. But, you should obtain some coverage for liability concerns.

There are also a few more specialized forms of Liability Protection.

Contracting Errors and Omissions (E&O) covers:

  • The costs to redo faulty work, including the cost of labor and materials.
  • Consequential or third-party losses caused by faulty work. This includes financial and production losses that can be directly attributed to the faulty work.
  • Damage for the contractor’s faulty workmanship, materials, or products. This may include design.

This example illustrates how E&O coverage works.

The insured just completed a $75,000 electrical wiring renovation. Six months later, an electrical fire causes considerable damage. The cause is determined to be improper installation of the wiring. While the damage to the building is covered under the General Liability policy, the cost of labor and materials needed to redo the work isn’t. E&O coverage would respond not only to the costs associated with redoing the insured’s work but also to the costs of the corresponding materials.  A deductible typically applies.

Product Liability Coverage

If your business manufactures products for sale on the general market, product liability insurance is a must. Even a business that takes every measure possible to make sure its products are safe can find itself named in a lawsuit due to damages caused by one of its products. Product liability insurance works to protect a business in such a case, with coverage available to be tailored specifically to a specific type of product.

Commercial Vehicle Insurance

This is sometimes referred to as Commercial Auto Insurance, which we actually have a partner agency to assist with. If company vehicles will be used, those vehicles should be fully insured to protect businesses against liability if an accident should occur. At the very least, businesses should insure against third-party injury, but comprehensive insurance will cover that vehicle in an accident, as well. If employees are using their own cars for business, their own personal insurance will cover them in the event of an accident. One major exception to this is if they are delivering goods or services for a fee. This includes delivery personnel.


So there you have it. Seven different types of Commercial or Business Insurance, starting with the ever-important Commercial Property. It’s the biggest investment most businesses ever make, similar to the residential home being the largest investment in a family. Make sure it is taken care of and talk to the experts. We’ll be here if you need us.



How Does Commercial Insurance Protect Your Business?

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As a small business owner, you face risks daily that can cause setbacks to your enterprise. Knowing how to handle these risks is essential to the success of your business. Through commercial insurance coverage, you can not only protect a new business but help it expand and grow. Here are just a few of the many ways commercial insurance from Commercial Property Shield in Califon, NJ can benefit your business:

General Liability Coverage

General liability insurance protects you against lawsuits in the event a customer suffers injury or property damage due to services or products your company provides. If a customer experiences accidental injury or property damage on your business property, liability coverage will foot the bill for expenses incurred and cover the legal expenses of a lawsuit if it should arise.

Business Property Coverage

If your property, equipment, or goods suffer damage or loss, business property coverage can help cover repair or replacement costs, protecting you from financial loss.

Business Interruption

Business interruption coverage kicks in when you have to close down your business temporarily due to a disaster that causes severe damage to your property. This coverage can help cover lost income, employee wages, rent payments, and the expenses of relocating to a new location while your old one is being repaired. This financial compensation can help you move forward.

These are just a few ways commercial insurance can protect your business. You should also keep in mind that commercial property insurance policies are complex documents that carefully detail precisely what protections they offer. While business owners should review all of a policy’s paperwork when purchasing a policy, there are a few particular items to pay special attention to. If you’re in the process of getting business property insurance for your business, make sure you carefully review these five items before purchasing a policy.

Business Owners Should Check These 5 Items When Getting Commercial Property Insurance

1. Named Perils vs. Open Perils

Commercial property insurance policies (and several other insurance policies) are either named perils policies or open perils policies. Named perils policies typically only cover the risks that are specifically listed in them, while open perils policies generally cover any risks that aren’t explicitly excluded.

For the best coverage, look for an open perils business property insurance policy. Most open perils policies offer more comprehensive protection than named perils policies, for open perils policies don’t limit coverage to only the risks that are specifically mentioned in their paperwork.

2. The Amount of Coverage for Buildings

Business property insurance policies usually clearly state how much coverage they offer for any buildings that a business owns. You’ll want to make sure that any policy you select provides sufficient coverage for your business’ building(s). It’s often wise to get enough coverage to pay for reconstructing a building, which may cost more than the building is actually worth.

One way to determine that figure is to engage a local contractor and request an estimate for replacing the building. Another way is to contact a Commercial Property Shield insurance specialist who can provide a state-of-the-art estimating tool.

3. Replacement Value vs. Actual Cash Value

Most business insurance policies offer coverage for a business’ equipment, inventory, supplies, and similar items. This coverage may be replacement value coverage or actual cash value coverage.

To ensure that your business will be able to fully recover if its equipment or inventory is damaged, look for a policy that offers replacement value coverage. Actual cash value coverage will usually only cover items for their depreciated value, which may be much less than it’d cost to purchase new items. Replacement value coverage normally offers enough protection to replace items with new ones.

Further, while some insurers might allow you to insure for less than 100% of the replacement cost, that might not be the best idea. Depending on your business owners policy and insurance company, you might have a co-insurance penalty clause. If so, you’ll have to pay a penalty if you under-report your insurance valuation or insure for less than 100% of replacement value.

For example, if your building is valued at $500,000 and you have a co-insurance value of 90%, you’re insured for 90% of the building’s replacement value ($450,000). If your building is insured for half the co-insurance amount ($225,000), you’d be reimbursed for only half of the loss. So if you sustained a $100,000 loss, you’d receive only $50,000.

4. Limits for Specific Items

Some business property insurance policies place lower limits on certain items than they do on other ones. For instance, a policy might offer much less coverage for electronics or valuable inventory than it does for other equipment or supplies.

When purchasing a policy, make sure any limits on specific items that the policy contains are sufficient for your business’ needs. If you need more coverage for a specific item than a policy offers, select a higher limit for that item, purchase a rider for the particular item or look for a different policy.

Talk to a Business Specialist!

5. Business Interruption Coverage

Business interruption coverage can often be purchased as a standalone policy, but it’s also available through many business property insurance policies. This coverage can help your business survive interruptions in operations that decrease how much revenue comes in.

Because business interruption coverage can often be purchased separately, it’s not necessary to limit your search for business property policies to only policies that offer this coverage. You should still check for this coverage, though. If two policies are otherwise similar, this coverage could help you choose between them. Also, you’ll want to know if your business property policy offers any business interruption coverage so that you don’t purchase duplicate coverage through another policy.

Compare Commercial Property Insurance Policies with a Commercial Property Shield Specialist

To make sure you fully understand what protections each commercial property insurance policy you consider offers, talk to an independent insurance agent. They’ll be happy to read through policies with you and check each of these items for you. With their assistance, you can be confident that the policy you select will provide the protection your business needs.