What Is Business or Commercial Insurance?
Commercial insurance, also known as business insurance, refers to insurance coverage
intended for businesses instead of individuals. Business insurance protects businesses from
losses due to unexpected events during normal business operations, such as lawsuits,
natural disasters, or accidents. There are many types of commercial insurance for
businesses, including coverage for property damage, legal liability, and employee-related
risks, among others. Insurance Companies evaluate commercial insurance needs, based on potential risks,
which can vary depending on the type of business and its environment. Learn about the
types of business insurance and what they provide. Different types of commercial insurance products include : General Liability insurance,
Professional Liability & Work Men’s Compensation insurance , Directors & Officers
insurance, Property insurance, Home-based business insurance, Fire & Burglary insurance,
Product Liability insurance , Public Liability insurance, Vehicle insurance, Cargo insurance,,
Fidelity Guarantee insurance, Cyber insurance, All Risks insurance, Contractors All Risks –
Erection – Plant Machinery, and Business interruption insurance. Note Commercial policies are different from personal lines insurance because they protect a
business, not an individual. Types of Commercial Insurance
Some businesses are required to buy a certain amount of commercial insurance coverage,
and then they can add coverage they want beyond that. Here are seven common types of
business insurance: Commercial General Liability Insurance Commercial general liability insurance is a type of policy for all businesses. It’s considered
comprehensive insurance, although it does not protect against all risks. General liability
provides coverage for bodily injury, property damage, medical expenses, libel, slander,
defending lawsuits, and settlement bonds or judgments. Professional Liability Insurance Unlike general liability insurance, which is for any business, professional liability insurance
(PLI) is designed for businesses that provide services. Coverage is for loss caused by the
service provided. It protects against expenses related to malpractice, negligence, or errors. Commercial Property Insurance Property insurance is designed for businesses with significant physical property, such as
equipment, signage, inventory, and furniture. It protects the business from losses in events
such as fire, storm or theft. Property insurance can cover, for example, damage to things like
inventory, computers, furniture, or signage. Commercial property insurance typically doesn’t cover the costs of events like floods and
earthquakes. If your area is at risk for these events, you’ll need a separate policy. Home-Based Businesses If you’re operating a home-based business, you will likely need additional coverage for
equipment and inventory. Standard homeowner’s policies don’t typically cover home-based
businesses like commercial property insurance covers businesses. You can add
home-based business insurance to a homeowner’s policy as a rider for a small amount of
coverage for equipment and a small amount of liability coverage. Note A business owner’s policy is an insurance package that is often ideal for small businesses
and home-based businesses. It is essentially typical insurance options in one bundle so you
can buy it efficiently and save money. Product Liability Insurance Product liability insurance is designed for businesses that are involved with products, such
as manufacturers, wholesale distributors, and retailers. Product liability insurance protects a
business from costs associated with damages caused by products, such as a defective
product causing bodily injury or harm. Without product liability insurance, a business can be
vulnerable to paying for expensive lawsuits. Vehicle Insurance Any vehicles used for business should be insured. Whether you have vans, busses, tractor
trailers, or passenger cars, you will need insurance in case of damage to the vehicles or
cargo, or injuries to others. Each state has a minimum amount of required insurance.
Several factors can affect the price of vehicle insurance, such as the driver’s driving record
and the condition of the vehicles. Business Interruption Insurance Business interruption (or continuation) policies are a type of insurance that is especially
applicable to companies that have physical locations, such as retail stores or manufacturing
facilities. Business interruption insurance compensates a business for its lost income due to events
that cause a disruption to the normal course of business. It’s typically added on as a rider to
a property insurance policy or as part of a business owner’s policy. Cyber insurance Corporate cyber insurance policy covers your losses and business liability arising out of a
cyber security breach. The policy offers complete insurance protection to your business
against cyber or digital risks that can result in a financial loss to the insured and reputational
loss to a third party because of a breach in the insured’s systems. Today every organization is highly prone to cyber-attack/incidents such as- data
alteration/deletion, cyber extortion for ransom from database encryption, network lockdown,
system failure, system encryption, service unavailable, unauthorised access, fraudulent fund
transfer and many more. Therefore, it is extremely necessary that the corporate sector
should adopt this practice for insuring their cyber security regardless of the size of an
organization. Besides, a cyber attack can result in data exploitation involving highly sensitive
customer information, employees data, business or contract details, financial information,
shareholders information and other important data. The insurance also pays for the costs
incurred in restoration of such data or a legal liability arising out of a third party personal
information being misused or leaked. It is extremely necessary that the corporates should adopt this policy in order to secure all
their financial data, employees & customers’ data, programs, computer and network of an
organization from the unauthorized access and exploitation. Also, in case of a cyber attack there are high costs required to be incurred for forensics,
investigation, ransom-ware, and losses related to business interruption of the insured post
an attack. Implementation of corporate cyber security will not only minimize the risks of data
breach but will also improve a firm’s mean-time to respond to an attack. Business owners put in a lot of hard work to grow a successful business. Though it’s an
overwhelming experience, it involves a lot of risks. Any successful business is built on trust
and personal relationships. ‘Breach of trust’ by employees is one of the major risks faced by
businesses. There can be many reasons for an employee to turn dishonest such as financial
crisis due to company separation, restricting company, dissatisfaction and frustration with
career growth or any other financial worries. Though such employees are only the minority
part of the workforce, employee thefts and fraudulent acts can result in huge business
losses. However, businesses can be protected from these risks by availing fidelity insurance.
Let’s learn more about fidelity insurance. Contractor’s all risk (CAR) Policy India is a developing country and huge number of construction projects related to residential
or commercial buildings, Industrial units, Roads, Power plants or dams are being carried out We all are aware of the risk or hazards like fire, flood or accidental damage involved during
the construction period which can damage the construction material, machinery or
constructed portion. Contractors All Risk is a comprehensive insurance cover to the client for any contingency
from the moment the material is unloaded at the site of the project and continues during
storage, physical construction/erection and till the test run is over and during maintenance, if
covered. Contractor’s all risk (CAR) policy protects the huge investment of Principal/ Contractors in
these projects by paying for such kind of loss during construction. It’s an All Risk Policy.The Policy indemnifies the Insured in the event of unforeseen and
sudden physical loss or physical damage to the Property Insured arising: during the period of Insurance whilst at the Project Site (or in storage) Contractor’s All Risk Policy is basically for insuring projects which have more than 50% civil
works Who needs Contractor’s All Risk Policy? Although Contractors All Risk policy may be taken by the Principal or by the contractor, but
usually, under the terms of the agreement between the contractor and the principal, it is
obligatory on the part of the contractor to effect a CAR insurance in their joint names before
the commencement of the project. What is the minimum policy period? Policy can be taken for a minimum period of 3 months. What is the maximum policy period? The policy has a maximum period of 84 months inclusive of Extended Maintenance Period. What other policy should one buy with my Contractors all risk insurance? ● Contractors Plant & Machinery for the plants and equipment involved in the
construction. ● Marine Insurance for the transit of construction material ● Workmen’s Compensation for yworkers How and When to cancel an ongoing policy? ● This insurance may be terminated at the request of the Insured at any time, in which
case, the Insurers will refund appropriate premium amount subject to the following
conditions. ● Claims experience under the policy as on date of cancellation should be less than
60% of reworked premium. ● The unexpired period is not less than 3 months or 25% of the policy period,
whichever is less. ● Testing period should not have commenced. What information should one share to issue the Contractors all risk policy? Detailed RFQ Principal, Contractor, Sub-contractor details Estimated Cost of project- contract cost, Other than Project BOQ material, Taxes etc Projects Start date, End date, and Bar chart Details towards Testing for EAR projects Equipment details like Imported equipment, second-hand details for EAR projects Sum Insured breakup towards different scope of works Risk location details, in case of multiple locations- names of all locations. (Lat-long
coordinates & Google maps required for road projects, transmission lines) Complete/Detailed scope of works or contract copy Wet works details and sum insured if involved What is covered by Contractor’s All Risk Policy? ● Location Risks: Fire, Lighting, Theft, Burglary & Housebreaking. ● Testing and Commissioning Risks*: Failure of Safety Devices, Leakage of Electricity,
Insulation failure, Short circuit, explosion. ● Act of God: Storm, Tempest, Hurricane, Flood, Inundation, Subsidence, Landslide,
Rockslide, earthquake. ● Handling Risks: Impact from falling objects, Collision, Failure of Cranes or Tackles
etc. ● Risk of Human Element: Carelessness, Negligence, Faults in Erection/Construction,
Strike & Riot, Malicious damage, Terrorism. ● Testing Perils: Maximum value at risk. A specific request to be made to UW. What is not covered by Contractor’s All Risk Policy? ● War & Allied Perils. ● Wilful act or wilful negligence of Insured/ his representatives. ● Excess in respect of each claim as stated in the policy. ● Normal wear and tear, gradual deterioration, lack of use, obsolescence, rust, etc. ● Any damages/ penalties on account of the Insured of the terms of delivery/
completion under his contract of construction. ● Nuclear & Allied Perils. ● Cessation of work. ● Losses discovered only at the time of taking an inventory. ● Loss/ damage due to faulty design, defective material or casting other than faults in
erection. ● Consequential loss/ liability of any kind. What is Fidelity Insurance? Fidelity insurance or fidelity bond insurance is a business insurance product that provides
protection against business losses caused due to employee dishonesty, theft or fraud. The
policy compensates such losses to business owners within the limitations of the policy.
Some of the examples of business losses include theft of money, theft of business inventory
and using business cash for personal profit etc. Types of Fidelity Insurance Availing fidelity insurance is one of the parts in a business’s risk management practice.
Fidelity insurance plans are available in four types. Following are the types of fidelity
insurance plans available- ● Individual policy: Under an individual policy, coverage is limited to losses due to fraud
or dishonesty of an individual employee. ● Collective policy: Under the collective policy, coverage is provided against the
business losses caused due to fraudulent acts by a group of employees. Coverage in
this type of fidelity insurance policy will be decided based on each employee’s
responsibilities and position. ● Blanket policy: Blanket policy covers a group of employees without the names of the
guaranteed person. Basically, this type of policy is issued to well-established
businesses. ● Floater policy: Floater policy guarantees a group of employees with one amount of
guarantee is given across the group. Minimum of five employees need to be there to
avail this cover. Who can Avail Fidelity Insurance? Every business having employees to handle cash and payment processes will require fidelity
insurance cover. The following business can avail fidelity insurance and get the benefits of
policy as these businesses are more vulnerable to the risk of employee frauds – ● Restaurants and cafes ● Retail businesses ● Businesses that require trade licenses
● A business that requires the collection of personal information from customers What are the Features of Fidelity Insurance? Fidelity insurance provides coverage against financial losses suffered by the organisation
due to fraudulent act of employees. Following are the features of fidelity insurance – The policy provides comprehensive coverage against various risks arising from fraud
and the dishonest act of an employee or group of employees such as loss of money,
property, securities or other assets, computer fraud, forgery, loss to customers etc Fidelity insurance offer tailor-made coverage to businesses depending on the need
and nature of work Fidelity insurance offers coverage with a broad definition of ‘employees’ Coverage under fidelity insurance will start for the insured event on or after the date
of commencement of the policy. Coverage is also applicable for a year or 12 calendar months from the date of policy
expiration In case of death, dismissal or retirement of the employee, coverage is valid for 12
calendar months of such death, dismissal or retirement whichever of these events
occurred first. What are the Benefits of Fidelity Insurance? As Fidelity insurance policy protects the business against losses arising due to an act of
fraud or dishonesty committed by employees, it becomes important for businesses to buy
fidelity insurance cover to have protection against such risks. Following are the benefits
offered by fidelity insurance – ● The fidelity insurance policy covers theft of funds committed by the employees. ● The fidelity insurance provides coverage for loss of business assets such as property,
stock certificates or any other assets ● The fidelity insurance provides protection against loss of customer’s property caused
by dishonest acts of an employee ● The fidelity insurance protects the business from financial crises coming from a small
portion of the workforce (dishonest employees) which can affect the entire business
and other employees. ● The fidelity insurance protects the reputation of business along with ensuring
absolute transparency in supervision and accountability requirements within the
business. ● As a part of the company’s risk management strategy, it’s important and ideal for
every business to consider availing fidelity insurance. It’s always better to take
precautions to stay safe than to be sorry later! What is covered under Fidelity Insurance? Fidelity insurance contract provides coverage against the losses to the insured business
which is caused by an act of fraud/theft/dishonesty of an employee or group of employees. Following are the coverages offered under fidelity insurance – ● Theft committed by employees is covered under the policy. This includes assets
stolen and the claims made by customers when the valuables are stolen. ● Act of forgery and defalcation of company’s money by employees ● Embezzlement, misuse of employment capacity for personal gain and any other
dishonest act by employees ● The coverage offered to the insured company is limited to –Amount of guarantee
stated against the name of any employee or against the relevant group/category of
employee in the policy schedule, and The total amount of guarantee specified in the
policy. What are the Exclusions under Fidelity Insurance? Fidelity insurance policy does not cover the following losses – ● Losses arising out of the suppression of facts affecting the risk at the time of effecting
the policy ● More than one claims made in respect of any one employee ● If there are any changes in the conditions or circumstances of the said employment
without the consent of the company. ● Losses arising elsewhere than in the territorial limits stated in the policy schedule ● Losses arising due to non-observance and relaxation of the system of checks and
precautions ● Consequential or indirect loss or damage which is not the direct result of insured
perils, nor does the policy cover apprehended loss or damage or contractual liability
or legal liability of any kind ● Discovered more than 12 months after the termination either of the guarantee or of
the service of the employee concerned ● Loss or damage attributable to willful acts or gross negligence on the part of the
insured, employee or any other person acting on their behalf ● Losses such as trading losses, stock-taking shortages and losses not caused by
dishonesty or fraud ● The loss is by an act committed subsequent to an earlier act of fraud or dishonesty
which had come to the notice of the insured or supervisor or to insured’s
representative ● Any loss resulting directly or indirectly from trading in securities ● Terrorism damage How does Fidelity Insurance Function? Fidelity insurance is indispensable for many businesses today. To avail the fidelity insurance,
the business should have clear records and details in place. Fidelity insurance basically
covers losses incurred due to an act of dishonesty or fraud by employees such as forgery,
identity theft, embezzlement and theft of funds/property or cash etc. Working on fidelity
bonds is quite simple. The fidelity insurance plan functions as below –
● A business that is seeking fidelity insurance needs to provide a detailed list of
employees and list of various departments under which business can incur a loss
due to fraud or dishonesty of an employee/employees ● Fill in the proposal form and provide every information required by the insurance
company. It’s important to disclose every detail and information to avail any hassles
later during the claim time ● Depending on the number of employees, nature of business and risk exposure, the
premium amount will be determined. ● A business owner can submit the proposal form along with other relevant documents
when the understanding of policy and premium payment is clear ● During the policy term, if any losses or damage arising due to an insured event,
insured business needs to immediately intimate the insurance company to claim the
compensation ● To initiate the claim, relevant documents along with duly filled claim form needs to be
submitted to the insurance company ● The insurance company will then conduct a survey to estimate the loss ● In case the claim gets approved, the claim amount will be paid out to the insured
business depending on the policy limits, terms and conditions ● If the claim gets rejected, the insurance company will inform the insured business
with an appropriate reason ● If the insured business is not satisfied with the resolution, it can take up the matter
with the court of Law. ● For example, let’s say the director of finance in a company has been transferring
funds from the company’s bank account to his account or utilising the company’s
funds for personal use without anyone knowing about these transactions. When this
embezzlement comes into notice, the company’s financial loss due to this fraudulent
act will come into the light. In this case, insured companies can claim coverage for
loss under fidelity insurance as soon as the embezzlement is discovered. The
insurance company will compensate for the loss after the careful audit and
investigation of the case. Claim Process for Fidelity Insurance The claim process for fidelity insurance is quite simple and easy. Following are some of the
easy steps to follow for fidelity insurance claims ● The insured company must immediately intimate the insurance company on the
occurrence of claim incident ● The insured company needs to take immediate disciplinary action against the
employee (based on the situation) ● The act of infidelity must be furnished with relevant proofs along with submission
claim documents and proof of loss to the insurance company ● The insurance company carries out the forensic audit ● The forensic auditor will verify and approve the claim amount (insured’s in-house and
overhead expenses are not included in the claim amount) ● If the claim is rejected, the insured company/claimant will be informed with the exact
reason for a rejection ● If the claimant is not satisfied with the resolution provided, the matter can be taken to
the court of law Documents Required for Fidelity Insurance Claims Duly filled and signed claim form Photocopy of the fidelity insurance policy document A detailed description of the employee’s job duties Private reference of the fraudulent employee Internal investigation report CCTV footage in case of theft Police FIR regarding the theft or embezzlement Auditors report estimating the quantum of loss Details on the date of discovery of the loss Statement from witnesses who can validate the loss Evidence of stolen property values such as receipts or invoices, if any Evidence of forgery or identity theft along with proof of loss Terminal benefits from any employee What Affects How Much Business Insurance Costs? Several factors can influence the price of a business insurance policy, including the number
of employees you have, the location of your business, and the amount of coverage you
want. Generally, the more employees you have and the more coverage you need, the more
expensive your policy will be. Prices also vary from region to region depending on the
associated risks. The Bottom Line Commercial insurance can be a valuable tool as it protects a business against potential
losses related to unexpected events. When shopping for business insurance, explore
several policy options and make sure you fully understand the terms for each. Consider
consulting a professional financial advisor who can review the options of policy types that
may best suit your business. Explanations mentioned in “What’s Covered & What’s Not Covered?” are illustrative and will
be subject to terms, conditions and exclusions of the Policy. Please refer to the Policy
Document for more details
