Commercial Insurance Definition
Commercial insurance is a policy designed to protect businesses, organizations, and their assets from potential financial losses. It covers risks related to property damage, liability claims, employee injuries, and other operational risks specific to a business. As the owner of a construction company, your insurance choices are driven by what you’re mandated to have and what you need to ensure a successful risk management strategy. The most common commercial insurance types purchased by construction companies are: workers’ compensation, general liability, commercial property, and builders risk.
Workers Compensation
Workers’ compensation is a form of commercial insurance mandated by most states. It covers workers when they are injured on the job. This type of insurance pays for the medical treatment for the worker and includes hospitalization, surgery, and physical therapy. Workers’ compensation also provides a monetary salary replacement to the injured parties to compensate them for lost wages.
General Liability
General liability is an example of commercial insurance that protects the insurer from a wide variety of third party claims. “Third party” refers to the fact that the insurance does not apply to the party that bought it.
General liability covers you in five areas:
- Commercial Property Insurance
As defined by the Small Business Administration:
“Property insurance covers everything related to the loss and damage of company property due to a wide-variety of events such as fire, smoke, wind and hail storms, civil disobedience and vandalism. The definition of ‘property’ is broad, and includes lost income, business interruption, buildings, computers, company papers and money.
Property insurance policies come in two basic forms: (1) all-risk policies covering a wide-range of incidents and perils except those excluded in the policy; (2) peril-specific policies cover losses from only those perils specified by the commercial insurance purchaser of a property policy.”
2. Bodily Injury
Covers medical costs and legal expenses if a third part is injured due to the contractor’s operations.
3. Personal and Advertising Injury
Covers claims of non-physical harm, such as libel, slander, or false advertising, if the contractor’s business activities result in reputational damage.
4. Completed Operations Liability
Covers against claims arising from work the contractor has completed if the finished product or service causes injury or property damage.
5. Medical Payments
Covers immediate medical expense coverage for minor injuries to third parties without requiring the third party to file a lawsuit.
Builder’s Risk Insurance
Builder’s risk is an example of commercial insurance that covers buildings and structures under construction or renovation. It protects against unexpected events that could cause damage to the project before it is completed, ensuring financial security for contractors, project owners, and other stakeholders involved.
This type of policy includes property damage from events like fire or vandalism, construction materials/equipment, temporary structures like scaffolding, and soft costs like legal fees or permits that arise from project delays caused by covered losses. Incidents like floods or earthquakes would not be covered unless a rider specifically includes these types of events on the policy.
Builder’s risk insurance is usually purchased by the builder. However, common law states that once a property has had improvement done on it, it belongs to the owner. Because of that law, in some cases, the owner will take out the builder’s risk insurance.
Commercial Insurance Coverage with ACI
Affordable Contractors Insurance (ACI) specializes exclusively in the construction industry. Our agents can help you select the right coverage for your company amongst the plethora of commercial insurance products. You never need all the products, but you will need a knowledgeable insurance agent to determine what you do. Our professionals are ready to help you meet compliance standards and determine the best coverage for your budget and specific needs. Reach out today!
