Business insurance policies are specifically designed to insure businesses and other organizations, and these policies are distinct from personal policies that insure individuals. Here are some of the ways that business insurance policies differ from personal policies.
Higher Deductibles and Limits
Every insurance policy has deductibles and limits that determine how much that policy will pay on a covered claim. Deductibles dictate what a policyholder themselves must pay before the policy begins paying on a claim. Limits determine the maximum amount the policy will pay on a claim.
As an example, consider an insurance policy that has a $1,000 deductible and a $100,000 limit. If you had this policy and filed a claim worth $110,000, the policy would pay $100,000 and you'd pay $10,000. The payments would work out as follows:
- You'd pay the first $1,000 up to the deductible
- The policy would pay the next $100,000
- You'd pay the remaining $9,000 above the policy's limit
Thus, the policy would end up paying $100,000 in total, and cover the claim's costs between $1,000 and $101,000.
The functions of deductibles and limits are the same in business and personal policies, but the amounts of these items often differ. In general, business policies tend to come with much higher deductibles and limits than personal policies do. This is because businesses normally have more financial resources and sometimes face substantially greater risks.
Separate Property and Liability Policies
Most individuals procure liability coverage through their homeowners or renter's insurance. These policies combine protections for people's houses (in the case of homeowner's insurance) and belongings with liability protections against basic risks. This is alright when purchasing personal policies because most individuals are exposed to the same basic liability risks.
Businesses aren't exposed to the same risks, however, because they operate in significantly different spaces. A lawyer who provides legal counsel, a doctor who performs surgeries, a retail store that sells goods and airline that transports people all have very different operations -- and very different risks as a result.
Because businesses face vastly different risks, business policies generally don't combine property and liability coverages together. Instead, property policies and liability policies are purchased separately so that businesses can select the liability policies that make sense in their situation.
The one common exception to this general rule is business auto insurance, which provides property coverage for a business' vehicles and liability coverage for accidents that employees cause. This is because businesses that have cars all need liability coverage against accidents.
If you are interested in learning more about business insurance, feel free to contact an insurance agent for more info.