What is the Difference Between Commercial and Business Insurance?

What is the Difference Between Commercial and Business Insurance?

Just like individuals need health care insurance, home insurance, and car insurance, businesses need insurance coverage as well. 

Consider these scenarios:

  • What if an employee or customer is injured on your premises? 
  • What if your products are faulty or cause physical or financial damage?
  • What happens if a fire, flood, or earthquake damages or destroys your office location? 

That is where business and commercial insurance protects and defends your business. It enables you to get back to business quickly in the event of an accident, lawsuit, or disaster. Having coverage from a commercial insurer is also required by law in many states. 

As a business owner, it is crucial to know the differences between commercial and business insurance and what is covered by each type of commercial insurance coverage.

What is Commercial Insurance?

Commercial insurance (also known as business insurance) is an insurance product that protects you from any unforeseen problems that could affect your business. Commercial insurance protects both the business owner and their employees from risks of injury, business interruption, and other risks. 

You’ve probably purchased insurance for things like personal auto insurance, home insurance, or life insurance policies. You can think of commercial insurance in the same way.

Every business is different, so there is no one-size-fits-all business insurance policy available. This is where a licensed insurance broker can help.

When you own a business (or are a sole proprietor), it’s often legally required to have commercial insurance. It can be confusing to know which commercial insurance policy is required or beneficial for your business.

Commercial Insurance Vs. Business Insurance

When business owners are looking for the best insurance policy for their business, they often confuse the terms’ commercial insurance’ and ‘business insurance.’ 

Even though they sound different, they are actually the same, and the terms can be used interchangeably. 

Some business owners may be under the impression that they need one type of insurance or the other, which can be confusing.

The reality is that commercial insurance and business insurance are simply a category of insurance that provides coverage for all types of businesses.

The Most Important Types of Commercial and Business Insurance

If you own or run a business, there are some types of commercial insurance that you must have and some that are optional. Here is a breakdown of the most important types of business and commercial insurance:

General Liability Insurance 

Sometimes called Commercial General Liability or CGL, this is the most basic form of commercial liability coverage. If you own a business, having General Liability coverage is not optional.

General liability insurance helps cover: 

  • Costs for property damage claims against your business
  • Medical expenses if someone is injured at your company
  • Administrative costs to handle covered claims
  • Court costs, judgments, and settlements for covered claims


Keep in mind that general liability insurance usually does not cover:

  • Damage to your business property or office
  • Personal injury claims made by your employees
  • Auto accidents caused by you or your employees while driving for work purposes

Workers’ Compensation Insurance 

Workers’ compensation (sometimes known as workers comp) helps cover work-related injuries and illnesses by paying for medical treatment and replacing lost wages while your employees recover. Most states will require workers’ comp insurance if you have at least one employee.

The insurance provider protects your employees if they suffer bodily injury or any type of financial loss due to accidents in the workplace. 

Workers’ compensation is based on a ‘no-fault system.’ This system states that an injured employee does not need to prove that the injury or illness was someone else’s fault to receive workers compensation benefits. Any on-the-job injury or illness can be covered by workers comp. 

If you are a California employer, you are required under California Labor Code Section 3700 to provide workers’ compensation insurance. An insurance broker can help you source workers’ comp insurance from a licensed insurance company. 

Another option for workers’ comp coverage is to source it through the State Compensation Insurance Fund (State Fund). This State Fund helps to provide reasonably priced workers’ compensation insurance and keeps costs down.

Another option for business owners is having the option to self-insure. Your insurance broker can help you with purchasing workers compensation from a licensed insurance company and help you with State Fund and self-insurance information.

Commercial Property Insurance 

Commercial property insurance helps cover property damage to your business property. It protects your company’s physical assets from fire, explosions, burst pipes, storms, theft, and vandalism. Keep in mind that earthquakes and floods typically aren’t covered by commercial property insurance unless added to the policy.

Keep in mind that commercial property insurance is different from commercial auto insurance, which covers damage to vehicles that are owned by your business. If you need collision coverage for your cars, trucks, or other business vehicles, look into a commercial auto insurance policy.

Professional Liability Insurance 

Insurance brokers may call this errors and omissions insurance, and it can help cover errors in services your business provides. It helps cover claims including negligence, misrepresentation, violation of good faith and fair dealing, and inaccurate advice. Depending on the terms, a professional liability insurance policy may also help cover privacy violations that can threaten your business.

Umbrella Business Insurance

Suppose you feel that your business is especially at risk of being sued or is in an incredibly litigious state. In that case, you may want liability coverage that goes beyond the maximum amount offered by your commercial liability insurance policy. 

You can often buy an umbrella policy or excess insurance policy to add additional coverage. Umbrella policies can cover you for liability claims that go beyond what your typical policy covers.

Commercial Business Insurance is Needed for Large and Small Companies

Some business owners think that business insurance is necessary for small companies only. Others believe that only larger corporations need commercial insurance.

This misunderstanding can cause business owners to miss out on important and helpful insurance coverage.

Whether your business is big or small, it is crucial for you to speak to your insurance agent to ensure you have the most appropriate insurance policy for your business. They can help you manage the insurance cost and find a custom commercial insurance plan that works with your budget.

They can also help you with commercial vehicle insurancecommercial health insurance plans, and business interruption insurance to help your business grow.

Commercial insurance comes in many packages that can be uniquely tailored to fit different businesses’ needs.

Jackson & Jackson Insurance Agents and Brokers offer commercial insurance with over 80 years of experience serving the San Dimas, Glendora, and LaVerne business communities.

We can help you design a specialized package according to your property, liability, and casualty needs. Our agents are proactive in identifying any factors that may increase your business insurance premiums, change your risk, and provide consulting and risk management options to protect your business.

Whether you are a retailer, wholesaler, or contractor, we can tailor a package to meet your specific needs and requirements. Call today or fill out one of our free online quote forms to get started.

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