Every owner of a retail business is aware that understanding commercial insurance is crucial. However, once you start digging, it gets much more complicated than any personal insurance coverage you have ever had to set up.Every owner of a retail business is aware that understanding commercial insurance is crucial. However, once you start digging, it gets much more complicated than any personal insurance coverage you have ever had to set up.
What exactly is commercial insurance then? Businesses can get commercial insurance to provide coverage for their operations, personnel, and property.
Why Commercial Insurance Is Important
Let’s begin with a true incident: When I originally began to write this post, I sent out a request for retail shop owners to contribute their stories and insights regarding commercial insurance. Mark Aselstine, the company’s creator, shared the following:
“We’re an online wine club. When we first opened, our warehouse was a 100-square-foot space in the corner of a larger construction business. It was an awesome setup — we got to piggyback on their office staff and had free WiFi and a bathroom to use.
At some point, there was a flood. The city where we were located put in a storm drain to stop the leaves from trees going into the bay. Unfortunately, that drain caused our warehouse and the larger construction business to flood.
We lost some wine. We thought it would be the perfect time to use the insurance we’d been paying for. But our policy said that the wider construction business would need to be part of the filing. They couldn’t because their clients were cities themselves, and they didn’t think it would be good for their business to file against a client.
So, we got stuck not being able to file when we needed to — despite having paid for insurance for a couple of years — because our policy wasn’t written for a business as small as ours.”
Lesson learned? Not only can not having commercial insurance coverage be costly, but not having the right type of coverage can be just as costly — or even more.
When discussing commercial insurance generally for merchants, there are numerous distinct types of coverage that address both general and specialised requirements. An article on Reuters.com provides the following list of commercial insurance types as a general overview, which is still current today:
- Property insurance: Covers losses and damages to real and/or personal property.
- Boiler and machinery insurance: Boilers, machinery, and equipment are covered by this, which is sometimes known as “equipment breakdown” or “mechanical breakdown coverage.” Even though it might appear unrelated to retail, this also applies to computers.
- Debris removal insurance: Pays for removing debris after a devastating event, such as a fire or flood.
- Builder’s risk insurance: Covers buildings while they are being constructed. This is a good one to get if you’re building a new store.
- Glass insurance: Covers broken store windows and plate glass windows.
- Inland marine insurance: Covers property in transit and other people’s belongings on your property.
- Business interruption insurance:covers expenses and lost income due to property loss or damage (i.e., you can’t run your business for a while).
- Ordinance or law insurance:if your building has been partially destroyed, it will pay for the costs associated with tearing it down and erecting it again in compliance.
- Tenant’s insurance:Tenant’s insurance (also known as renter’s insurance), if you rent your retail site, covers losses to changes you make to the rental space as well as losses brought on by staff negligence.
- Crime insurance: Covers theft, burglary, and robbery from both employees and external sources.
- Fidelity bonds: Covers losses due to a bonded employee’s theft.
- Liability insurance: Covers injuries that you or your property cause to third parties.
- Errors and omissions insurance: “E&O” refers to errors or omissions that result in harm to a third party. “The act must truly be an unintentional mistake, not just bad judgement or purposeful acts,” says the law.
- Automobile insurance: Covers cars, vans, trucks and trailers used for your business.
- Workers’ compensation insurance: Covers employees’ on-the-job injuries. This commercial insurance is often required by law.
And a few additions:
- Commercial umbrella insurance: Extends the coverage provided by your other policies.
- Cyber liability insurance: protects against data breaches and cyberattack losses. Small and medium-sized firms account for 62% of cyberattack victims. According to Dave Zappacosta, lead agent at Bridge First Insurance, “If your POS system is compromised, merely informing all of your clients is a cost that may sink the ship.”
They also list the average annual costs by retail store type:
- General merchandise store: $760
- Clothing store: $855
- Flower shops: $855
- E-cigarette/vape shop: $890
- Grocery store: $1,100
- Jewellery store: $1,160
Your price will depend on a number of variables.
According to Matthew A. Struck, partner at Treadstone Risk Management, “the criteria that impact your insurance cost are your business kind, location, quantity of business you do, history of insurance claims, and the amount of insurance you acquire.”
There are several factors to take into account, and not all types of coverage are required for all types of retailers. While some policies are required by law, others are discretionary.There are several factors to take into account, and not all types of coverage are required for all types of retailers. While some policies are required by law, others are discretionary.
According to Walt Capell, president and owner of Workers Compensation Shop, “depending on the state you operate in, most firms are legally required to have general liability and workers’ compensation.”
It also depends on how you operate your business.
The company will need commercial auto insurance if employees are using company-owned vehicles, he notes. “If an employee is operating a personal car while working, the employer is responsible for any accidents the employee causes. Auto insurance for rental and non-owned vehicles can cover this.
Additionally, there are differences between brick-and-mortar, pop-up stores, and event selling in terms of how and where you can offer your goods. Let’s deconstruct it:
Brick and Mortar Store Commercial Insurance
Your brick-and-mortar store commercial insurance checklist:
- Business interruption
- Liability
- Property
- Crime (make sure it covers employee theft)
- Cyber liability (find a policy that includes first- and third-party loss)
Whether you lease or own the facility will have the largest impact on how you approach commercial insurance for your actual retail business, according to Zappacosta.
Either you must insure the building because you are its owner, or most leases include an insurance clause that may call for more insurance than is necessary.
There are different policies that cover each scenario.
While your space may be one of your most valuable assets, the lifeline of your biz is your product.
The majority of [store] owners’ top worries, particularly for stores, are their inventories, according to Zappacosta. “You want to make sure you have the right amount of company personal property coverage and are aware of your figures.
“Insurance coverage and rates are also dependent on your merchandise.
You will unquestionably be evaluated on the genuine stuff that you sell, he claims. “The insurance provider will assign a risk factor to your industry based on your real product.”
In addition, agents will “grade” your risk factor according to a variety of factors, according to Zappacosta, including but not limited to sales income, payroll, square footage, and the number of employees.
Pop-Up Shop Commercial Insurance
Your pop-up commercial insurance checklist:
- Business interruption
- Liability
- Property
- Crime (make sure it covers employee theft)
- Cyber liability (find a policy that includes first- and third-party loss)
- Inland marine (maybe)
Recall that when looking for commercial insurance, protecting your product is one of the most crucial factors to take into account? That coverage may not always transfer if you start a pop-up store.Recall that when looking for commercial insurance, protecting your product is one of the most crucial factors to take into account? That coverage may not always transfer if you start a pop-up store.
Your inventory isn’t always protected for pop-ups, according to Zappacosta. The typical restriction for corporate personal property coverage is 1,500 feet inside the main building.
The location of the pop-up, as well as means of travel and who’s working it, determine what types of additional commercial insurance are needed.
Zappacosta advises buying an inland marine coverage that covers business personal property away from the premises if you are travelling with goods. Most plans will have a limited amount included in, but you need the inland marine coverage if you frequently have $5,000 or more in inventory at an off-premises location.
Event Sales Commercial Insurance
Your event sales commercial insurance checklist:
- Vendor liability
- Property
- Crime
- Inland marine (maybe)
If you sell at trade shows, festivals, markets and other events, you might be covered by the event host or venue.
According to Vince Lefton, CEO of Bulldog Adjusters, “Offline selling at trade fairs [may] use the insurance supplied by the venue, as they’re liable for incidents that occur on their premises.” Always do your research and consider your own scenario.
Again, coverage could not transfer over since you’re not selling at your usual location because you’re travelling. Struck suggests looking into vendor liability insurance as well as the same advise on inland marine insurance. To fit your event timetable, you can select brief coverage timespan options.
How to Get Commercial Insurance for Your Retail Business
We now have a general understanding of the kinds of insurance you’ll require (ep is to obtain it. Capell advises locating a reliable insurance agent and having a thorough discussion about your company’s requirements. Always conduct research for your particular situation. The next sentence
To get the best value (coverage + price), Struck advises working with an independent agent who can quote several insurers and compete with them.
In order to make your company more appealing to insurers and lower future insurance costs, you’ll also want an agent who can “offer risk management advice to help prevent claims from occurring.”
Capell agrees that working with an independent agent will help retailers get the best coverage and value.
They can shop your policy around to multiple carriers, and they also have the knowledge about which carriers are actively looking to quote the coverages you’re looking for,” he says. “This can help you get bigger discounts.
Commercial Insurance Providers
It’s best to shop around for the best policy. Here are some commercial insurance providers that you can explore:
- Insureon
- The Hartford
- CoverWallet
- Nationwide
- Artists, Crafters & Tradesmen Insurance
- Progressive
- Farmers Insurance
Choosing Your Policy
Once you’ve gotten your quotes, you’ll need to compare policies and choose to best one.
When selecting on an insurance coverage, Lefton urges business owners to take exclusions and limits into account.
According to Capell, a smart agent won’t suggest coverage if your business isn’t genuinely in danger. “Insurance agents work with people who are submitting claims every day. They are aware of how upsetting it may be for a business owner to suffer through a fire or other tragedy with inadequate insurance coverage. Most often, they suggest buying more insurance because of one of these occurrences.
Commercial Insurance Tips
Remember to never undervalue your inventory in hopes of getting a better deal.
According to Zappacosta, “insurance companies typically have endorsements that indicate if you were intentionally underinsuring they can partially deny claims.” Look for insurance providers who will calculate your liabilities based on your premises’ square footage and employee count rather than your revenue and payroll.
Once you have your policy in place, you’ll want to make sure you’re making the best use of it — and that you stay protected.
To ensure that your coverage has begun, Lefton advises checking with your insurance provider to see if they have received your premium. “And keep your insurance policy active.”To ensure that your coverage has begun, Lefton advises checking with your insurance provider to see if they have received your premium. “And keep your insurance policy active.”
Which commercial insurance policies do you have? Have you ever had to use them?
