Commercial insurance is a vital component of any modern business, but it can also be one of the most overlooked.  Many new business owners do not understand the need, or even what it is.  What makes it even more complicated is that there are three discrete types, and each of them is necessary in its own way.  The three main types of commercial insurance that any business owner will need are: property insurance, liability insurance, and workers compensation.  The purpose of this article is to break down and explain these three types, what they do, and why it is important for each business to have them.

Commercial property insurance is the most straightforward of the three types, as most people are familiar with similar types of insurance in use for their homes.  Property insurance financially protects the physical place of business from damage caused by various things.  Fire insurance, flood insurance, theft insurance, and commercial car insurance are popular variations.

The particular protections that you incorporate into your plan will be dependent on the particular area you are in.  For example: if your business is located in a city at sea level or next to a river, flood insurance may be particularly handy in the event of a heavy downpour, while it may be utterly useless in the middle of the desert.  The key is to keep your particular situation and what may happen in your particular area in mind.

Workers compensation is the part of commercial business insurance that is necessary if your business has any employees.  In most places, this type of insurance is required by law for any business that has employees.  If an employee is hurt on the job in the act of his or her usual duties, that employee is able to have his or her medical bills paid by the insurance company.  While the employee is recovering from the injury, he or she will also receive a portion of his or her usual pay as part of the insurance payment.

Liability insurance is probably the one that is overlooked the most.  Commercial general liability insurance may be the only thing that saves you in the event that something involving your products or service goes terribly, horribly wrong.

In the event that an employee, product, or service of the business causes damage to another person or another person’s property, that business is extremely vulnerable to litigation.  The liability portion of commercial insurance will cover the damages awarded to the other person, including court costs, lawyer fees, and the damages rewarded.  Depending on what exactly happens, a single lawsuit can destroy a very profitable business.

While it may at times seem like an extraneous expense because it is needed so seldom, commercial insurance, when needed, can be the lifeline that makes all the difference when tragedy strikes and a business would otherwise be forced to shut down or declare bankruptcy.