Business liability insurance vs. commercial property insurance

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Most businesses carry both commercial property insurance and liability insurance for the distinct protections they offer.
A man holding a model of an office building.

Sometimes bad things happen without warning. Take, for example, the CNN report of a massive explosion in Seattle that destroyed a building and injured nine firefighters. The report states the blast was so powerful that windows shattered in businesses as far as two blocks away. The most likely culprit? A natural gas leak.

A quick internet search shows that gas leaks aren’t as rare as you might think, but this story is just one reason most businesses usually carry both commercial property insurance and business liability insurance. In short, the two types of insurance offer two distinct protections: coverage for your property and coverage for lawsuits. Let’s take a closer look at how these policies can help a small business owner pick up the pieces after an unexpected disaster.

What is commercial property insurance?

Commercial property insurance is the policy that can protect your business's physical assets, including its building, furniture, equipment, inventory, and more.

This is the policy you turn to when you need to repair or replace business property that is damaged by:

  • Fire
  • Hail
  • Lightning
  • Windstorms
  • Vandalism
  • Explosions

Let’s say your business is the one obliterated by the gas leak in Seattle. Your commercial property insurance may help cover the cost of repairs, making it easier for you to return to business as usual.

What is business liability insurance?

Commercial property insurance may cover the damage to your business property, but what about the damage to your neighbors' property? If the explosion is your fault, you could be on the hook for their damages. That’s why it’s important to have business liability insurance, too.

Business liability insurance helps you address the responsibilities you have to the people who come into contact with your business, such as…

  • Customers
  • Partners
  • Suppliers
  • Vendors
  • Employees

Each relationship creates different exposures, so insurance companies offer different types of liability policies to fit those risks. Here's a quick rundown of some liability insurance policies and the risks they cover:

  • General liability insurance. General liability can help address third-party lawsuits, or those suits brought by individuals who are not your employees. For example, if a customer is injured in your store and sues, general liability can help cover your legal expenses.
  • Professional liability insurance. This policy, also called errors and omissions insurance, can address client-initiated lawsuits. It typically pays for your legal expenses when a client claims your work was negligent.
  • Workers' compensation insurance. Workers’ comp helps you comply with state laws and take responsibility for employee work injuries. It can help pay for their medical bills and lost wages.
  • Employment practices liability insurance. Your business can also face claims of discrimination from employees and job candidates. EPLI addresses that exposure by helping to pay for legal expenses if you face certain employment lawsuits.

An insurance agent can help you assess your risks and determine which small business liability insurance policies make sense for you.

How to bundle your business liability and commercial property policies

More often than not, accidents – even the ones that don’t involve explosions – have a bigger reach than you anticipate. A momentary distraction that keeps you from cleaning up a spill or from turning off a faucet can set off an expensive chain reaction where people get hurt and you foot the bill.

Of course, insurance isn't free, but you can reduce your coverage costs by bundling your policies. By combining general liability and commercial property into a business owner’s policy, insurers can often offer these fundamental policies at a reduced rate.

Bundled insurance is a practical way to get your general liability and commercial property insurance, but you may face other risks that require different coverage.

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