How to read and understand business insurance quotes
- Read the fine print and details on any quote
- Consider how much coverage you need
- Understand the difference between per occurrence and annual aggregate
- Be aware of what is covered and what is excluded
- Be aware of deductibles
- Ensure coverage meets the contract requirements of your clients (if applicable)
There are several things to consider when choosing commercial insurance. While price does matter, other factors are just as important. Picking a policy because it offers the lowest price may get you into trouble, in fact.
So, what factors should you consider? We offer this guide to understanding business insurance so you can choose the best policy for your circumstances.
Pay attention to the details
It pays to read the fine print when picking insurance. The adage that some deals are “too good to be true” applies to commercial insurance, too. Read over the policy carefully to see what it covers, coverage limits, and deductibles. You especially want to pay attention to exclusions and specific things that are not covered.
Here’s an example of a quote for a typical commercial insurance policy, which includes:
- General liability
- Professional liability (Errors & Omissions insurance)
- Cyber liability
- Product liability
- Property insurance
Purpose: general liability protects you, your business, and your employees, as well as products/services that you sell if someone is injured on your property. It also covers damage to someone else’s property. It will cover your legal fees and any judgments against you in case you are sued.
General liability covers:
- Bodily injury claims
- Medical payments of the injured party
- Property damage caused by your business/employee(s)
Here’s a breakdown of what liability insurance covers with a sample coverage amount:
- General liability per occurrence – Amount the policy will pay for a single liability claim (example: $1 million).
- General liability annual aggregate – Total the policy will pay out annually (example: $2 million).
- Medical – Amount your policy will pay for immediate medical expenses if someone is injured on your property (example: $10,000).
This type of policy is often called “errors and omissions insurance”. Its purpose is to protect your reputation in case you make a mistake that affects a customer or client. It will pay legal fees and/or judgments in case you are sued over any such errors.
Professional liability covers:
- Mistakes or omissions in work
- Missed deadlines or undelivered services
- Breach of contract
- Wrong advice
- Reputational harm (libel, slander, wrongful conviction, privacy violations)
- Advertising errors, including lawsuits and copyright infringement
Here’s a breakdown of what professional insurance covers:
- Personal and advertising injury per occurrence – Covers liability over copyright infringement and/or defamation (example: $1 million).
Cyber liability insurance
Cyber liability covers your business in the case of a cyberattack or data breach that compromises the private information (data) of customers, clients, vendors, or employees. It also covers computer/system hacking and viruses that corrupt individual files or your entire network.
Types of cyber liability coverage:
- First-party coverage – Pays recovery expenses after a cyber event (notifying customers, repairing software/hardware, PR/marketing to repair your reputation, and business interruption).
- Third-party coverage – Pays legal costs associated with lawsuits or claims against your company.
Here’s a breakdown of what a typical cyber liability insurance policy covers:
- Data breach response – Amount the policy will pay to recover after a data breach/cyber incident (example: $10,000).
- Data breach defense – Amount paid for legal fees in the event of a lawsuit or claim (example: $50,000).
Product liability insurance
Product liability covers damage or injury caused by a product you created, distributed, or sold. It can include physical products and computer software. It can also cover claims over marketing defects, improper labels, or a lack of a product warning on packaging.
Here’s a breakdown of what product liability insurance covers:
- Products completed operations aggregate – Covers liability for products you create, distribute, or sell that cause an injury or illness (example: $2 million).
Property insurance covers physical buildings and grounds (landscaping, trees, parking lots, fencing) as well as property and equipment and/or electronics inside. Coverage can apply whether you own, rent, or lease the property.
Here’s a sample breakdown of what product liability insurance covers.
- Damage or loss of property (example $1 million).
- Damage to rental property/premises – The policy will pay the property owner for repairs/replacement if you are liable for the damage (example: $1 million).
- Property claim deductible – Amount you pay toward a claim before your policy will cover the costs (example $500).
- Business property – Covers assets that are lost or damaged in a covered event (example: $10,000).
- Business computers and media – Covers computers, mobile devices, and smartphones connected to your network if they are damaged, lost, or stolen (example: $10,000).
- Laptop computer – worldwide – Covers your laptop if it gets damaged when you’re not physically on the property (example: $5,000).
Other key points to consider
Read over the quote, paying special attention to explanations for what is covered, as well as exclusions. Make sure the policy meets business’ needs. You also want to ensure the coverage meets the contract requirements of your clients (if applicable).
There are a few key words you’ll want to understand, including:
- Per-occurrence limit – Highest amount the policy will pay for a single incident.
- Aggregate limit – Highest total the policy will pay for claims in a single policy period (generally one year).
- Deductible – Amount you need to pay out-of-pocket before the policy kicks in and begins paying a claim.
Some commercial policies will bundle things like general liability, property insurance, and more in a single Business Owner’s Policy (BOP). Others offer standalone general liability policies. Make sure you compare a BOP vs. BOP or standalone policy vs. standalone policy rather than a BOP vs. standalone policy.
Here are some other business insurance categories you may need to include in your policy:
- Worker’s compensation
- Commercial auto
- Business interruption
- Commercial umbrella
- Directors & Officers
- Life/Key Person insurance
Ensure you have the right commercial insurance coverage
This guide should help you understand how to read and interpret commercial insurance quotes. Being familiar with these terms and typical coverage amounts will help you choose the right policy for your business.
Keep in mind that every industry has different risks, and therefore, different insurance needs. For instance, if you save, transfer, or collect a lot of client data, you might need more cyber insurance coverage. If you manufacture or sell a lot of products or software, you might need more product insurance.
Avante Insurance can help you secure the right commercial insurance to protect your life’s work. Contact us to talk about your business needs and request a quote. We will ensure you have the right coverage to protect the enterprise you’ve worked so hard to grow.
This blog and website are made available by the publisher for educational and informational purposes only. It is not to be used as a substitute for competent insurance, legal, or tax advice from a licensed professional in your state.