4 Ways That Commercial Insurance Differs From Residential Insurance
Your home insurance policy protects you from liability and certain kinds of damage. If you need to insure your business, you might imagine a commercial insurance policy is much like home insurance.
However, because business owners have different needs than homeowners (and businesses generally face greater liabilities than homes), commercial insurance differs from residential insurance in more ways than you may think. Here’s a closer look at some of the main differences.
1. It Requires More Kinds of Coverage
A homeowners insurance policy will usually protect you from most types of liabilities. However, because businesses (especially businesses open to the public) face greater liability, a commercial insurance policy needs to include additional types of liability coverage. Here are some of the most common:
Business Interruption Insurance: Can cover rent, payroll, and income if the business temporarily closes or relocates
Worker’s Compensation Insurance: Pays for medical bills and other expenses if a worker is hurt on the job
General Liability Insurance: Protects the business if someone is injured on the property
Product Liability Insurance: Helps the business cover costs related to defective products
The exact types of coverage and policy limits needed will depend on the specifics of your business. An insurance agent can review your needs and help you design the right commercial insurance policy.
2. More People May Be Named on the Policy
Businesses generally have much more complex ownership structures than homes do. On a homeowners insurance policy, only a single person or married couple is typically named.
On a commercial insurance policy, the named insured will be just one person if the business is a sole proprietorship. However, if the business is owned by an LLC or corporation, it’s the business — and not necessarily the people in it — that will be named.
3. It Can Cover More Than One Property
Residential insurance policies generally cover just one property — the home of the named insured. However, in some cases, a commercial insurance policy can cover multiple buildings or locations.
That being said, most insurers stipulate that to be included on the same policy, locations must have similar uses. For instance, if your company has two warehouses, both of them might be included in the same policy. However, you likely couldn’t include your warehouses and your retail store on the same policy.
4. It’s Usually Written by a Surplus Line Insurer
Most residential policies come from insurance companies licensed to work in your state. But as you might imagine, commercial properties come with greater risks than residential properties.
In many cases, licensed insurance companies can’t take on these commercial policies because of risks. Instead, the commercial insurance policy comes from a surplus line insurer, a company that may be based in another state.
Finding the Right Coverage
Whether you need a residential policy, a commercial insurance policy, or both, clearly understanding the differences between the two is vital. When you understand the unique benefits each policy type offers, you’ll be able to select the right coverage for your home, your business, or both.