Commercial Insurance Terms that Frequently Spark Question Marks

“Commercial Insurance” describes different types of coverages that are packaged together to protect your company, employees, assets, and owners. It’s common hear terms like “Small Business Insurance,” or even industry specific names like “Farm” or “Retail Insurance.” These are all pointing to a Commercial policy tailored to a specific category of business.

As part of our glossary series, we are on a mission to make Insurance more approachable. This means defining some of our jargon. Here are a few Commercial Insurance terms that frequently spark question marks.

Business Overhead Protection: Overhead expenses refer to ongoing, fixed bills that are required to run a business (like rent, insurance, etc.). In other words, these expenses are due even if you don’t make revenue. Business Overhead Protection is a type of insurance that reimburses a business owner for fixed overhead expenses if they become disabled.

Business Owners Policy (BOP): A BOP is foundational to Commercial Insurance. This policy packages together a few of the most common and necessary coverages for most small businesses, including General Liability, Business Property, and in some cases, Business Interruption. Once you have these core coverages determined, you can customize your policy by adding more coverages, or even Endorsements to tweak policy language. For example, a freelance writer may purchase a BOP and add Errors and Omissions (E&O) and Cyber Liability to protect their professional advice and digital risks.

Buy-Sell Agreements: These are legally binding contracts between business partners that dictate how their shares will be distributed or sold upon death or forced/voluntary departure from the company. This type of agreement can be funded by a Life Insurance policy.

Commercial Risk: Every industry holds various unique risks. The more risks you have, the more coverages you will need, indicating a higher policy premium. In general, an insurance company will gauge potential risk exposure with these four questions:

1. Do you engage with other people as part of business? If so, you are exposed to legal liability and will need to specific liability coverages to address the risk of harm to others, even if it’s an accident.
2. Does your business have assets – an office, equipment, inventory, just to name a few? If so, you will need specific property coverages to address the risk of damage or loss to business property.
3. Do you or an employee drive a vehicle as part of your business? If so, you are exposed to liabilities associated with damage to/by your vehicle(s) and will need specific commercial auto coverages.
4. Do you employ another individual(s)? If so, you will need Workers Compensation. This is wage replacement and medical benefits in case of a work-related injury or illness.

Key Person Life Insurance: This is a policy that businesses purchase to protect themselves in case a named “key person” (such as a partner, director, vice president) dies. The business owns the policy, pays the premiums, and is also the beneficiary. If a named person dies, the business will use the death benefit to support company interests.

Qualifying Event: These are changes to or within your business that can impact your Commercial Insurance policy. For example, if you hire more employees or change something simple like an address, your insurance policy will need to be updated. Qualifying Events allow you to request an update prior to your annual renewal date. Even if you’re unsure if a particular change is a Qualifying Event, it’s best to keep your Insurance Advisor in the loop. If your policy language is out-of-date, you could have a hole in your coverage.

Need further clarification on any of these terms? We are just one phone call or email away!

If you’re looking for more Commercial Insurance resources check out our business-related blogs here  and discover your industry’s specific risks and coverages here.

Connect With an Expert