Question

Commercial Insurance Guide

Create a commercial insurance guide. This should be a detailed, extensive explanation of commercial insurance that a manager in a decent sized manufacturing company would find useful in understanding commercial insurance. Examples of how the various types of commercial insurance policies and additional coverage options work will be helpful. You will need to cover:

• Property insurance

• Liability insurance

• Transportation insurance

• Workers’ compensation

You will need to decide the best way to convey this information to the business manager. This guide should be approximately 5 pages and look professionally done.

Answer 1

Introduction to Commercial Insurance

Whether you are contemplating starting a new business, are a new business owner, or have owned a business for many years, commercial insurance can be one of the most important ongoing financial investments you make in the life of your company. Operating a business is extremely challenging without having to worry about suffering significant financial loss due to unforeseen circumstances. Commercial insurance can protect you from some of the most common losses experienced by business owners such as property damage, business interruption, theft, liability, and worker injury. Purchasing the appropriate commercial insurance coverage can make the difference between going out of business after a severe loss or recovering with minimal business interruption and financial impairment to your company’s operations.

One of the first steps in purchasing small business insurance is to contact a licensed insurance broker-agent who specializes in commercial coverages. Beginning a working relationship with a reliable, competent broker-agent can be as crucial to your business plan as getting professional advice from an accountant, banker, human resources analyst, payroll specialist, lawyer, or a trusted business mentor.

Business contacts that you have made are excellent referral sources for recommending a commercial lines broker-agent, especially if the contacts are in the same industry as your business or in a closely related industry.

Professional broker-agent associations can assist you in your search for a licensed commercial insurance broker-agent. The Insurance Brokers and Agents of the West (IBA West) and the Western Insurance Agents Association (WIAA Group) are professional associations that can assist you in contacting a commercial insurance broker-agent in your local area. Please see the "Resources" section of this brochure if you would like to contact the IBA West or the WIAA Group. Also, looking through the local yellow pages under the insurance section can aid you in locating the phone numbers for those broker-agents specializing in commercial insurance.   

Depending on the individual risk characteristics of your business, the broker-agent will present you with different coverage options for purchasing commercial insurance. A broker-agent's proposal is just that, a proposal. When all is said and done it is your responsibility to make an informed decision and choose the insurance that best fits your business plan. The relationship that you build with a broker-agent is extremely valuable in this critical decision making process. An experienced broker-agent has dealt with hundreds of businesses similar to yours. Since commercial insurance can be complicated, you should feel free to discuss any terms, conditions, or concepts that are unclear to you with your broker-agent. It is part of a broker-agent's service to answer your questions and help you understand the insurance you are purchasing.

While your business may not need all commercial coverage lines, it is a good idea to have a basic knowledge of the types of insurance coverage available. As your business changes and expands you will have the necessary knowledge to purchase insurance coverage as new exposures arise. The following commercial lines of insurance cover broad areas of exposure common to most business operations:

Property Insurance

• Commercial Property
• Inland Marine
• Boiler and Machinery
• Crime

Casualty Insurance

• Commercial Automobile
• Commercial General Liability
• Commercial Umbrella
• Workers Compensation

Commercial Property

Coverage Sections, Limits of Insurance, and Coinsurance

Buildings you own or lease as a part of your business, your business personal property, and the personal property of others make up the basic coverage sections of commercial property insurance. Commercial property insurance can be sold separately as an Individual Line policy (referred to as a monoline policy), or it can be sold as part of a Commercial Package Policy (CPP), which combines two or more commercial coverage parts such as commercial property, general liability, and commercial auto.

Building coverage includes buildings or structures and any completed additions, which are listed on the declarations page of a commercial policy. Permanently installed fixtures, machinery, and equipment are also insured as a part of building coverage. The limit of insurance is the estimated amount needed to rebuild your building and to replace permanently installed fixtures, machinery, and equipment in the event of a total loss. You are required under the insurance policy to fully insure the value of your buildings. If a building is not insured to value, you can be subject to a monetary penalty at the time of a loss. This penalty is commonly referred to as "coinsurance." It is important to read and understand the coinsurance clause of your commercial property policy and to discuss any questions with your broker-agent.

Inland Marine

Without prior knowledge of inland marine insurance, it is easy to assume that this insurance line has something to do with boating transportation. In fact, inland marine insurance can cover a variety of transportation exposures; however, it does not cover boating transportation, which is covered under ocean marine insurance. Inland marine is a specialized type of property insurance that primarily covers damage to or destruction of your business property while in transport. Inland marine also covers the liability exposure for the damage or destruction that may occur to property in your care, custody, or control during transport.

Covered Causes of Loss

Standard perils in Inland Marine may include fire, lightning, windstorm, flood, earthquake, landslide, theft, collision, derailment, overturn of the transporting vehicle, and bridge collapse.

Coverage Forms and/or Specialty Coverages

Inland marine has great flexibility in covering many potential transportation risks. Some of the most common types of coverage offered are accounts receivable insurance, consignment insurance, equipment floaters (i.e., contractors equipment), installation floaters, motor truck cargo insurance, trip transit insurance, and valuable papers (records) insurance. If you have questions regarding particular business, then contact your broker-agent for further information.

Casualty Insurance

Casualty insurance provides coverage primarily for the liability exposure of an individual, business or organization. Liability from the negligent acts and omissions of an individual, business or organization that causes bodily injury and/or property damage to a third party is the subject of casualty insurance coverage. Commercial Automobile, Commercial General Liability, Commercial Umbrella, and Workers Compensation are the most common business casualty insurance lines.