Property Insurance
Most small businesses/practices have hundreds of thousands of dollars worth of equipment, physical property, records, and improvements to leased or owned space. Fire, water, or some other peril could easily damage or destroy an office resulting in massive repair and replacement costs. Further, damage or destruction of office property often results in a business interruption and subsequent loss of income. Business owners property and general liability policies are designed specifically to address the property and casualty risks that a firm or solo practice may encounter.
Most property insurance policies for small businesses take the form of a Business Owner's Package or BOP. Most include similar components. Noteworthy among these components are insurance provisions for general liability, property damage or destruction, and business interruption. Some business owner's packages may include a commercial umbrella.
General Liability – Also known as "hazard", "public liability", or "premises liability", general liability pays an amount up to the limit of liability that an insured individual or entity becomes legally obligated to pay as the result of damage or injury. General liability insurance is most commonly associated with paying for injuries that an entity's customer, patient, or client sustains due to slip/trip and fall while on the insured premises. General liability also pays for claims that result from damage to property of others as a result of fire or water that originates on the premises of the insured entity. General Liability also pays damages due to Personal and Advertising Injury, such as libel, slander, false arrest, wrongful eviction and copyright infringement. General liability insurance for small businesses or practices is almost always written on an occurrence basis and is often subject to per claim and aggregate limits or a single aggregate limit. One might commonly see general liability limits of $2,000,000/$4,000,000 meaning that the limit per claim is $2,000,000 and the limit for all claims in sum in a single policy year is $4,000,000.
Property – the property insurance provision of a business owner's package is almost nearly written on an all risk (Special Form) basis as opposed to a named perils basis. All risk policies are generally the most desirable form of property insurance due to the broad coverage that they provide. These policies are intended to insure against all causes of loss except those explicitly excluded. Typical insured causes of loss include, fire, water damage that results from burst or leaking pipes, and theft. Typical exclusions are flood, war, and acts of terrorism.
Business Interruption – sometimes referred to as business income or loss of use, business interruption insurance is designed to replace loss of revenue or income that results from a covered cause of loss. This provision should not be confused with Business Overhead Expense insurance. Business interruption insurance is related to a physical business at specified premises, whereas business overhead expense insurance is related to the health and wellbeing of an insured business owner. Business interruption insurance is triggered by the same causes of loss as property protection, i.e. fire, burst or leaking pipes, etc.
Commercial Umbrella – umbrella insurance is a form of single-limit liability insurance which is triggered once the limit of an underlying liability policy is exhausted. An umbrella policy adds additional insurance to all underlying liability insurance policies or coverage parts. For example, a general liability policy with a $2,000,000 limit per claim would be exhausted if the insured entity became obligated to pay $3,000,000. However, if the same insured entity has a $1,000,000 umbrella liability policy, the loss is fully insured because the $2,000,000 of general liability insurance is augmented by an additional $1,000,000 of umbrella coverage. Note that while umbrella liability policies provide additional limits above and beyond underlying liability policies, they typically exclude professional exposures. Umbrella liability policies do not typically increase the limits of an underlying professional liability or malpractice insurance policy.