Insurance policies are generally used to protect a variety of things from certain risks. While one may be familiar with their residential policy, it’s important to understand that not all insurance policies contain the same terms. This is especially true when comparing the different types of coverage for residential and commercial properties. Knowing the key differences between commercial and residential insurance policies can help policyholders better understand their options when filing a claim.
Commercial Property vs. Residential Insurance
Commercial property and residential insurance share several similar traits. Essentially, both types of policies help protect against unforeseen property damage, as well as other risks that could be potentially financially damaging. Despite having several similar qualities, these specific policies are also incredibly unique and serve different purposes.
Some of the most common differences between commercial property and residential insurance include:
The named party on the policy
Depending on the type of policy, there may be several named insured parties. In a residential policy, the named insured are usually a married couple or an individual. In a commercial policy, however, any number of parties could be listed depending on the ownership structure of the business or property. It is not uncommon for legal disputes about a commercial insurance policy to center around who and what was covered.
The need for more specialized coverage
In addition to coverage for the property itself, business owners will also need to obtain coverage for more specialized needs than those outlined in a residential policy. When it comes to liability concerns, for instance, in residential insurance, the insured or the named party on the policy is generally covered against liability claims that may arise. For businesses, this is quite different.
Because a business is much more likely to experience liability claims from the public or other entities throughout its lifetime, it needs insurance in place to protect its interests. Everything from slip and fall events and production downturns to defective products and other unexpected events must be covered by a commercial liability policy well before they even occur.
The same is true when certain events occur that cause such destructive damage to a company that its property is inoperable for some time. In these instances, commercial property owners will also need to have a business interruption policy in place. This specialized policy can help to pay for the income lost should the business need to temporarily close or relocate. These policies also cover ongoing expenses like payroll, rent, and other items needed to maintain operations. The insured will need to show the income the commercial property was generating both before and after the covered event to receive proper compensation under its business interruption coverage.
The need for insurance coverage for multiple properties
Often, residential policies cover one property listed on the policy. Business owners, however, may have multiple locations for one company. In certain cases, one commercial insurance policy can cover multiple locations; this typically only applies if the properties have similar uses. If a business owns an office location separate from its manufacturing facility, it will likely need two different commercial property policies to cover each location’s unique needs.
The difference in risk
Coverage for both commercial and residential properties may address similar risks. Both will cover unexpected weather events and/or vandalism that can occur at a property during its time in use, but residential insurance is much more standardized. This is because businesses have many different needs due to the additional risks they face that residential insurance doesn’t address.
Commercial property coverage often requires insureds to purchase additional policy endorsements to cover the cost of more unique risks that may occur. Additional coverage may include items like valuable papers and records reproduction, meeting local ordinance codes when rebuilding, the replacement of employee or customer property, and more.
Who writes the policy
While most residential policies are written by insurance companies admitted and fully licensed to conduct the business of insurance within Texas, surplus lines insurers write most commercial policies. Surplus lines insurers are not admitted in the state in which they are doing business, and are generally either loosely regulated or unregulated by the department of insurance. Surplus lines insurers are also not backed by a state guarantee fund in the event they become insolvent. These plans can thus sometimes involve dangerous schemes wherein unauthorized offshore reinsurers carry the real risk without any regulation or oversight.
Commercial Insurance Claim Lawyers
Commercial insurance claims are often much more complex than residential claims because the policies that govern them are tailored to each business. Regardless of which coverage you choose for your commercial insurance, you have the right to hire an attorney to assist you with commercial insurance claims. The attorneys at Raizner Slania can examine your insurance policy to determine your available coverage and any payments you may be owed. If you believe your commercial insurance claim has been denied, delayed, or undervalued, contact us today for a free consultation.
