If you run a small or medium sized business you will need to understand the risks that your enterprise is exposed to in order to avoid financial loss. We asked our resident insurance expert to give us an overview of Commercial Insurance risks:
Understanding Commercial Insurance Risks and Business Insurance Covers
By Dave Healey
If you own or manage a business, either large or small, you will require some type of insurance to protect your company against the various risks and potential multitude of claims, that your business will face.
Commercial insurance or Business insurance as it is commonly known, is a complicated area of underwriting and because all businesses are different, and face different risks depending upon the nature of the company, various packages and combined policy covers have been introduced by insurance companies and commercial broker schemes, to make the process easier.
An example of a small business insurance package which is commonly sold online is the Tradesman’s insurance package, which includes all elements of cover required by a small business or self employed trader such as basic liability covers and theft of tools.
Other small business insurance packages that are trade specific and can often be obtained online are available for shopkeepers, offices, surgeries, hotels and guest houses, restaurants, public houses and builders.
Large companies will be offered what is known as a commercial combined policy which has many different elements of cover which can be combined to make a bespoke policy for the enterprise. Most large companies will require some degree of risk assessment before the policy is underwritten, which may often include a visit to the business premises or site, and for this reason these types of larger business usually employ the services of specialist commercial insurance brokers.
The largest risk that a business faces is from liability to others, and the potential costs and damages a company could face if a claim was made against it.
All companies are required by law to have in place liability cover, called Employers liability insurance or EL, to protect their staff against all potential risks and accidents while in the workplace.
Business liability insurance is usually sold as a package and will always include Public Liability, often just known as PL, which protects the company against claims from the public whilst on the business premises.
A further type of liability insurance called Product liability is also available to companies under a commercial liability policy which protects the company against claims made for design or manufacturing faults in the product.
Company directors can also protect themselves against liabilities with Directors and Officers insurance (D&O) cover.
Most business large and small will have premises that need protection against buildings perils such as fire and flood and commercial property insurance is available to cover all buildings insurance risks. Similarly commercial contents insurance for business premises is available which covers office and business equipment including files and data processing against the common perils. For companies that carry stock, this type of business contents insurance can be extended to cover risk such as deterioration and damage.
For the small businessman who works from home these covers are often available with strict limits of indemnity, as a bolt on to a standard home buildings and contents policy. This type of cover is often effective for self employed people with just a computer and a home office.
Business Contingency Cover
One of the largest problems faced by a business is that of how to continue in business should the worst occur, for example a fire that destroys the premises. In order to deal with this Insurance companies have devised a cover called ‘Business Interruption Insurance’. Based on your previous years annual turnover, this protection insurance covers your company against all losses caused by interruption to trading due to any of the perils mentioned on the policy and will pay out on a indemnified basis for the period of cover agreed in the policy. Most policies will also offer some type of alternative trading accommodation to enable you business to continue whilst the premises are being repaired.
Additional Commercial Risks
Because commercial insurance is designed to cover all classes of business, there are many various trade or business specific covers available which can be added to a combined policy. Examples of these covers include loss of licence to trade, glass cover, goods in transit cover, book debts, commercial vehicle insurance, hauliers cover, warehouse cover, engineering insurance and plant inspection services, and theft by employees.
Outside of most combined policies are additional risks more often sold under separate policy covers, that should be considered to protect your business against all eventualities.
Examples of these are, Commercial Legal Expenses insurance cover which protects the company against claims made by employees for unfair dismissal and allows you to bring cases against suppliers.
Various protection policies are also available for businesses including Keyman insurance which provides cover against the loss of key people within your organisation. Business mortgage protection provides a monthly payment for business premises should you suffer and accident or sickness. Group ASU policies are also available to protect your staff and employees.
Purchasing Business Cover
Purchasing commercial risks insurance can be a daunting experience for the uninitiated small business owner and unless the risks are straightforward and can be underwritten online, it is advisable for all companies to approach the services of a local or regional commercial insurance broker. Insurance Brokers will not only be able to assess the complete range of risks that your business is exposed to, and provide the correct levels of cover, they will more often than not have a unique local knowledge of the risks involved and will be able to negotiate premiums that reflect the nature of the risks. Furthermore, in the event of a claim, and as most businesses will be faced with claims at some point in their trading life-cycle, the broker will handle all the settlement negotiations with the insuring company and allow you to continue what you do best – running your business.
Commercial insurance and tradesman risks covers for small business insurance are widely available online today. For larger commercial enterprises it is strongly advisable to visit commercial insurance brokers for a detailed assessment of the risks your particular business is exposed to.
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