Insurance policies help businesses and homeowners alike protect their assets from certain risks. While most are likely familiar with the ins and outs of their residential policies, commercial ones are quite different and often require a more nuanced approach to policy terms. Knowing the key differences between commercial and residential insurance policies can help policyholders better understand their options when filing a claim.
Commercial vs. Residential Insurance
Commercial property and residential insurance share many similarities. Both types of policies protect against unforeseen property damage. However, commercial insurance also helps to protect business owners against additional risks that can be financially damaging. Despite these similarities, each policy type is unique and serves different purposes.
Commercial Insurance
Commercial insurance can include a variety of policies used to protect against many unique hazards often associated with businesses. Depending on the size and scale of the company, these plans can vary significantly. Often, the most common policies business owners will need should cover property damage, business interruption, liability, and workers’ compensation, among other things.
Residential Insurance
Residential, or homeowners’, insurance is specifically designed to protect a person’s residence. These policies protect homes, personal property, and certain liabilities that homeowners may face.
Key Ways Commercial Insurance Differs from Residential
To understand the nuanced distinctions between commercial and residential insurance, policyholders must examine their differences—specifically, their distinct needs and policy elements—more closely.
Property Types
- Commercial Insurance:Â Covers offices, factories, warehouses, retail establishments, schools, restaurants, religious facilities, and more. These policies cover unforeseen damage to the property, equipment, inventory, and furnishings.
- Residential insurance:Â Covers single-family homes, condos, and apartments. It typically includes damage to the home’s structure and personal property inside.
Commercial Policies Require More Types of 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.
Regarding 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.
For instance, depending on the policy type, several named insured parties may be included. In a residential policy, the named insured is 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.
Because a business is much more likely to experience liability claims from the public or other entities throughout its lifetime, it needs insurance to protect its interests. A commercial liability policy must cover everything from slip-and-fall events and production downturns to defective products and other unexpected events well before they even occur.
The same is true when certain events cause such destructive damage to a company that its property is inoperable for some time. In these instances, commercial property owners must also have a business interruption policy. This specialized policy can help pay for lost income 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 must show the income the commercial property was generating both before and after the covered event to receive proper compensation under its business interruption coverage.
Often, residential policies cover one property listed on the policy. Business owners, however, may have multiple locations for one company. In some instances, 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.
Commercial Property Owners Have More Legal Exposure
While residential claims are typically personal to the homeowner, they require fewer legal obligations than commercial property owners. Commercial properties are used by management, employees, the general public, other businesses, or approved vendors, thus making the liability risks much greater when property damage is present on site. Because of this, commercial property owners often carry more responsibilities and a duty to uphold the safety of others beyond themselves.
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 the reproduction of valuable papers and records, meeting local ordinance codes when rebuilding, the replacement of employee or customer property, and more.
Commercial Claims Often Generate Larger Settlements and More Documentation
Commercial property claims are inherently more involved than residential ones, requiring a much more in-depth preparation process with many legal considerations. Because of these higher stakes, it’s not uncommon for commercial property owners to seek comparatively larger settlements.
Larger properties also require more documentation to be present when filing a claim. Many will need to hire a public or private adjuster to handle extensive paperwork, manage investigation inspections, and navigate negotiations with insurance carriers.
Who is Responsible for Writing the Coverage
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 where they are doing business, and are generally either loosely regulated or unregulated by the insurance department. Surplus lines insurers are also not backed by a state guarantee fund in the event they become insolvent. These plans can involve dangerous schemes wherein unauthorized offshore reinsurers carry the real risk without any regulation or oversight.
Commercial Property Insurance Claim Attorneys
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 Board-Certified 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 to see how we can help you and your business.