Types of Commercial Insurance

Commercial insurance is one of the most comprehensive insurance plans created to help businesses mitigate unforeseeable downsides. As businesses grow in different geographies and markets, their net risk exposure usually goes up. Hence, it is true that commercial insurance can produce more value for larger businesses. Still, it does not mean that smaller companies cannot benefit from commercial insurance. Such insurance contracts can create value for businesses of all sizes, operating across varied geographies and even industries. The types of benefits commercial insurance can generate for business depend on the risks associated with the business and the type of insurance a business has availed. Since the risks can warry between businesses, it is worthwhile to understand the types of commercial insurances.

What are the Types of Commercial Insurance?

Most business operators begin their research by asking – what are the types of commercial insurance products available in the market? While that question is perfect, the line of reasoning is not. Their primary focus should be on exposure to certain risks. And then, they can locate insurance products that mitigate those particular risks. For decision-makers and operators who are interested in getting a repository of the different types of commercial insurance products available, here is a list of the most common ones:

1. Third-Party Liability Insurance: Such insurance products cover the business against liabilities it may owe to other businesses. For instance, if a factory catches fire, the factory-owner may lose a significant inventory portion. However, a buyer in the upstream might have to pay penalties for a delayed government contract and hence file for a claim against the factory-owner. Third-party liability insurance can protect the interests of the factory-owner and provide compensation for the upstream buyer.

 

1. Insurance for Small and Medium-Sized Business Operators: Small and medium-sized businesses can be prone to several risks at once – theft, natural disasters, or organized crime. Commercial insurance can provide the business-owners, who often have their entire net-worth associated with the business, a considerable cover against such risks.

 

1. Insurance for Fixed Assets (Plant and Machinery, Office Equipment): Wear & tear and depreciation are common to plant & machinery and office equipment. But, a breakdown can bring the entire business process to a halt. Commercial insurance coverage can protect the company from losing its cash reserves in getting the fixed assets repaired.

 

1. Insurance for Goods in Movement (Cargo, Transit, and Marine Insurance): Goods in transit can get damaged in an accident, stolen by an organized crime syndicate, or rendered useless in a natural calamity. Businesses on the buying, supplying, and logistics side have significant exposure to this one transition. Insurance products like Cargo Insurance, Transit Insurance, and Marine insurance can protect most of the businesses involved in the transaction.

 

1. Insurance Against Cyber Threats: Cyberattacks have become more sophisticated than ever. Even enterprises with dedicated cybersecurity teams risk getting attacked by malware, ransomware, and other security breaches. A commercial insurance cover in this direction can help in paying for the cost of upgrading the technology post an attack, hiring a specialist to handle the damage to brand equity, the cost of hiring a professional negotiator, and even the third-party liabilities the business may owe to its customers and employees.

 

1. Protecting the Employees and the Business Against the Employees: Factory workers on the floor often work with heavy machinery. Even a minor issue with the plant can cause damage to the health of the employees, despite the cautions taken by the management team. A workmen's compensation cover under commercial general liability insurance can protect the business and provide the dues to employees in such situations.

  At the same time, if the director of a large company is found to be engaged in criminal activity, the common shareholders may demand damage-induced compensation from the firm. Here, a Directors' and Officer Liability insurance cover can help the firm in compensating the shareholders.  

1. Fire and Burglary Insurance: These are two of the most common instances which can lead to capital outflow for a business. It is not surprising to see that businesses of all scales are exposed to such risks. The insurance policies that tend to cover enterprises from such risks are often categorized under commercial insurance.

 

FAQs

1. Are cargo insurance and transit insurance identical?

Yes. Both of them are nearly identical types of commercial insurance.  

1. What is the difference between marine insurance and fire insurance?

As the name suggests, fire insurance covers the business interest from their exposure to risk induced by a sudden outbreak of fire that might be caused by accident, natural calamity, or even negligence. Marine insurance is a more comprehensive insurance product covering goods in transit using marine routes from theft, fire-induced damage, natural disasters, and other risks.