What is a Business Insurance Policy?
Every small business owner should protect his company against a variety of risks
through a small business insurance policy. Defending against lawsuits and claims
can be costly, time-consuming, and draining. Yet, many small business owners are
unsure about the details of a business insurance policy.
A business insurance policy is a contract between the insured (the policyholder),
and the insurer (the insurance company). The contract determines what claims the
insurance company will cover and pay. In exchange for payment for covered peril
damages, the insured policy holder pays premiums to the insurer.
Understanding your small business insurance policy helps you verify that
- the coverage meets your needs
- what conditions need to be met in order to obtain coverage
- what exclusions take away coverage
- what the insurance company’s responsibilities are should a loss occur
To better grasp the key areas of your business insurance policy, it’s important
to learn about the major parts of the business insurance contract.
Declaration Page – The declaration page is typically
the first part of an insurance policy. It describes what risks are covered, what
properties are covered, the business insurance policy limits, the deductible, the
premium, the policy period, and who is the insured.
Definitions – The definitions section defines
significant terms used in the business insurance policy language.
Insuring agreement –The section of the business
insurance policy describes what is covered and includes promises made by the insurance
company; the latter of which typically includes paying for covered perils and providing
spelled-out services.
Exclusions – The exclusions section describes
the major types of exclusions, which are commonly excluded perils, excluded losses,
and excluded property. Examples of exclusions may include flood, earthquake, and
normal wear and tear of an automobile.
Conditions –Qualifiers or limitations on the
insurers promise to perform or pay are known as conditions. Common conditions examples
include a proof of loss requirement or cooperation during a defense or investigation.
If the business insurance policy conditions aren’t met, the insurer has the right
to deny coverage of the claim.
Endorsements and Riders –An endorsement or rider
is a written provision to the business insurance policy language that adds, deletes,
or modifies the original provisions in the insurance contract.
While all small business owners don’t have to be small business insurance policy
experts — after all, that’s what we here for — it’s important to at least have
a basic understanding of the major building blocks that comprise a small business
insurance policy.
