What Is Commercial Lines Insurance?

Commercial lines insurance includes property and casualty insurance products for businesses. Commercial lines Insurance helps keep the economy running smoothly by protecting businesses from potential losses they couldn’t afford to cover on their own, which allows businesses to operate when it might otherwise be too risky to do so.

Commercial policies may be contrasted with personal lines insurance.

Key Takeaways

  • Property casualty insurance can be broken down into two major categories: commercial lines and personal lines.
  • Commercial lines accounts for about half of the U.S. property casualty insurance industry, and includes the many kinds of insurance products designed for businesses.
  • Risks and hazards covered under commercial lines include, for example, malpractice insurance, professional liability, builder's risk, crop insurance, and many other industry-specific coverages.

Understanding Commercial Lines Insurance

Commercial lines insurance include products, such as commercial auto insurance, workers compensation insurance, federal flood insurance, aircraft insurance, ocean marine insurance, and medical malpractice insurance. Commercial lines protect businesses against potentially devastating financial losses caused by accidents, lawsuits, natural disasters, and other adverse events. Available coverages and premium costs vary by business type, size, and location. In 2013, the five largest issuers of commercial lines, as measured by the amount of premiums written, were American International Group (AIG), Travelers, Liberty Mutual, Zurich Insurance Group and ACE Ltd. None of these companies had an especially large market share.

While all commercial lines share some similarities, each policy will be tailored for the type of business being covered and the client’s unique needs. Suppose a structural engineering firm needs professional liability insurance. An insurance policy could protect the company against claims of negligence in creating a building’s plans, performing inspections, and supervising construction, as well as against claims of failure to render professional services. The firm could purchase general coverage as well as specific, additional coverage for each project, plus coverage for punitive damages.

Other Considerations

Commercial lines aren’t just for large corporations. Even a small, home-based business might need one or more commercial lines because homeowners insurance provides limited or no insurance for business activities. For example, a home business might need commercial auto insurance for a company-owned delivery vehicle, workers compensation insurance for the employee who drives the vehicle, property insurance to cover business goods stolen from the home or vehicle and liability insurance to protect against claims by any client who claims the business’s product harmed them.

Types of Commercial Lines Insurance

There are several different types of commercial lines insurance, with many policy types tailored to a specific industry or industry-specific hazard. Here are just a few examples:

  • Debris Removal Insurance: this insurance covers the cost of removing debris after a catastrophic event, such as a fire burning a building down. Before rebuilding, the remains of the old building must be removed. Property insurance alone typically won't cover the costs of removing the debris.
  • Builder's Risk Insurance: this coverage insures buildings while they are being constructed.
  • Glass Insurance: glass insurance covers broken windows in a commercial establishment.
  • Inland Marine Insurance: this covers property in transit and other people's property on your premises. For example, this insurance would cover fire-damage to customers' clothing from a fire at a dry cleaning business.
  • Business Interruption Insurance: this insurance covers lost income and expenses resulting from property damage or loss. For example, if a fire forces you to close your doors for two months, this insurance would reimburse you for salaries, taxes, rents, and net profits that would have been earned during the two-month period.
  • Demolition Insurance: used to cover the costs of demolishing a building that is damaged by a peril, such as a fire or storm. Zoning requirements or building codes may require that a damaged building be demolished rather than repaired. Demolition insurance covers the cost of tearing down undamaged portions of a damaged structure.
  • Crop-Hail Insurance: a type of insurance that provides coverage for damage and destruction by hail and fire. Purchased by farmers, it is designed to protect agricultural products while they are still in the field and have yet to be harvested. Crop-hail insurance protects the livelihood of farmers, who are often at the mercy of sudden weather events.