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Insurance can be confusing. There’s a lot of lingo and legal-ese. Details change depending on the insurance company or individual policy. As a business owner or professional, you know you need insurance. But what’s the difference between commercial property and liability insurance? Do you need both? EasyCover is here to help and make getting coverage easy. 

Commercial property insurance covers physical damage to property belonging to your business like buildings, furniture, equipment, tools, and more. Commercial liability insurance covers legal expenses for certain types of lawsuits, depending on the type of liability insurance. We’ll review exactly what’s covered and how it works in this article. You will need commercial property insurance for your premises and its contents, including any equipment, inventory, tools, and furniture. Your commercial liability insurance needs will depend on your individual business although all businesses should have commercial general liability and cyber liability insurance.

Commercial Property Insurance

Commercial property insurance helps cover repairs or replacement to your company’s property if it’s damaged by a “peril” or “risk” (which is another way of saying the cause of damage). Here are the most commonly covered perils:

  • Fire
  • Smoke
  • Explosion
  • Lightning
  • Wind
  • Hail
  • Electrical current
  • Falling object
  • Impact by vehicle or aircraft
  • Theft
  • Riot
  • Vandalism or other malicious act
  • Water damage from indoor plumbing or system or container or water main
  • Sewer backup*
  • Flooding (overland water)*
  • Earthquake*

Of course, what’s covered will depend on the insurer and your individual policy. If it’s marked with an asterisk (*), you usually need to purchase special add-on coverage. This may not be offered by all insurance companies and may not be available in your location.

Depending on your industry, you may also have specialized protection or exclusions for your business. 

Generally, the property includes anything owned by your company, such as the premises, furniture, inventory, equipment, tools, office supplies, and more. It’s a good idea to have a full inventory list along with pictures, videos and/or receipts so that you can accurately replace what was lost if you have a covered claim.

Keep in mind that every policy will have a limit. This policy limit is the maximum amount that will be paid out if you have a covered claim. Your limit should reflect the value of all your company’s assets in order to ensure you’re covered if something happens but not paying for coverage you don’t need.

 

Commercial Liability Insurance

Commercial liability insurance can help cover your business’ legal expenses if you’re sued in certain situations. This generally includes legal defence costs, settlements and awards. Some policies also offer fund for reputation management, recovery after an incident, and more. 

Each type of liability insurance covers a different type of scenario. The protection you need will depend on your business. Here are the most common types of commercial liability that the majority of companies can benefit from:

 

If someone is hurt or has their stuff damaged while on your company’s premises or as a result of regular business operations, this coverage will help cover damages and legal expenses.

 

If you provide a service or professional advice, a client can sue you for financial loss as a result of that service or advice or your failure to provide it. This protection can help cover your legal costs if this happens.

 

  • Product Liability Insurance

If you manufacture or sell products and they cause harm to a customer or damage their property, this coverage will help with legal expenses. Some policies also include product recall coverage although you may need to purchase this separately. 

 

  • Cyber Liability Insurance

If your business is a target of a cyberattack or victim of a data breach, this coverage can help you navigate the incident and recover from it. It usually includes funds for ransom or recovering the data, reputation management, notification costs, loss of income as well as lawsuits that arise from the cyberattack or data breach. Coverage varies depending on the insurer or policy though, so make sure you have comprehensive coverage!

 

  • Director & Officer’s Liability Insurance

As a director or officer, you can be held liable to claims of wrongdoing such as misuse of company funds, fraud, intellectual property theft, lack of corporate governance, wrongful dismissal and more. This policy can help protect the personal assets of directors and officers and can help cover legal expenses. 

As with most insurance policies, intentional harm or illegal activities are usually not covered. Your protection will depend on your individual policy and the insurance company. A policy limit (the maximum amount that will be paid out) will apply – make sure you know if the policy limit applies per term (usually a year) or per covered claim. 

Every business needs both commercial property and liability insurance protection, though exactly which coverages you should have will depend on your industry and individual business. Chat with one of our knowledgeable commercial insurance brokers for help in figuring out what your company needs or for more information about these coverages.